Leaders’ Committee

15 July 2014: 11:30 am

At London Councils offices, 59½ Southwark St., London SE1 0AL Refreshments will be provided London Councils offices are wheelchair accessible

Labour Group: Room 1 10:00 (Political Adviser: 07977 401955)

Conservative Group: Room 3 10:00 (Political Adviser: 07976 712611)

Contact Officer: Derek Gadd

Telephone and email: 020 7934 9505 derek.gadd@londoncouncils.gov.uk

Lunch will be provided in Room 3 for members after the meeting

At the end of the meeting there will be a brief AGM of London Councils Ltd

Agenda item Page

1 Declarations of Interest\*

2 Minutes of the Leaders’ Committee held on 11 March 2014 1

3 Welcome to new members – Chair

4 London Infrastructure Investment Plan 2050 – Isabel Dedring & Jeremy Skinner GLA attending 9

5 Governance of Fiscal Devolution -Tony Travers attending 17

6 Growth Deal, Devolution and Public Service Reform 35

7 Proposed Changes to the Governance of the Fire Service 49

8 Pensions Working Group: Progress report and proposed next steps towards a London LGPS CIV 67 Minutes and summaries:-

- Capital Ambition – 6 March 2014
- TEC – 13 March 2014
- Audit Committee – 20 March 2014
- Grants – 26 March 2014
- GLPC – 31 March 2014

*Declarations of Interests*

If you are present at a meeting of London Councils’ or any of its associated joint committees or their sub-committees and you have a disclosable pecuniary interest\* relating to any business that is or will be considered at the meeting you must not:

- participate in any discussion of the business at the meeting, or if you become aware of your disclosable pecuniary interest during the meeting, participate further in any discussion of the business, or
- participate in any vote taken on the matter at the meeting.

These prohibitions apply to any form of participation, including speaking as a member of the public.

It is a matter for each member to decide whether they should leave the room while an item that they have an interest in is being discussed. In arriving at a decision as to whether to leave the room they may wish to have regard to their home authority’s code of conduct and/or the Seven (Nolan) Principles of Public Life.

*as defined by the Relevant Authorities (Disclosable Pecuniary Interests) Regulations 2012* London Councils

Minutes of the London Councils Leaders’ Committee held on 11 March 2014 Mayor Jules Pipe chaired the meeting

Present: BARKING AND DAGENHAM Cllr Rocky Gill BARNET Cllr Richard Cornelius BEXLEY Cllr Teresa O’Neill BRENT Cllr Muhammed Butt BROMLEY Cllr Stephen Carr CAMDEN Cllr Sarah Hayward CROYDON - EALING Cllr Ranjit Dheer ENFIELD Cllr Doug Taylor GREENWICH Cllr Chris Roberts HACKNEY Mayor Jules Pipe HAMMERSMITH & FULHAM Cllr Nicholas Botterill HARINGEY Cllr Claire Kober HARROW Cllr Susan Hall HAVERING Cllr Steven Kelly HILLINGDON Cllr Philip Corthorne HOUNSLOW - ISLINGTON Cllr Richard Watts KENSINGTON & CHELSEA Cllr Rock Fielding-Mellen KINGSTON Cllr Liz Green LAMBETH Cllr Lib Peck LEWISHAM Mayor Sir Steve Bullock MERTON Cllr Stephen Alambritis NEWHAM Cllr Lester Hudson REDBRIDGE Cllr Keith Prince RICHMOND UPON THAMES Cllr Lord True SOUTHWARK Cllr Peter John SUTTON Cllr Ruth Dombey TOWER HAMLETS Mayor Lutfur Rahman WALTHAM FOREST Cllr Clyde Loakes WANDSWORTH Cllr Ravi Govindia WESTMINSTER Cllr Melvyn Caplan CITY OF LONDON Ms Catherine McGuinness LFEPA -

Ex officio (under the provisions of Standing Order 2.3)

GRANTS Cllr Paul McGlone

Apologies: BARKING AND DAGENHAM Cllr Liam Smith CROYDON Cllr Mike Fisher EALING Cllr Julian Bell KENSINGTON & CHELSEA Cllr Nicholas Paget-Brown HILLINGDON Cllr Ray Puddifoot MBE NEWHAM Mayor Sir Robin Wales WALTHAM FOREST Cllr Chris Robbins London Councils officers were in attendance.

The Chair opened the meeting by pointing out that it was to be the last meeting of Leaders’ Committee before the borough elections in May and for some it would be their final meeting as a member of Leaders’ Committee. Two members had indicated that they did not intend to stand again, Cllr Chris Roberts, a member of London Councils’ Executive would not stand again as leader of the Royal Borough of Greenwich and Cllr Catherine West, the current Chair of the Transport and Environment Committee, would stand down in that capacity at its next meeting. He thanked them for their work for London Councils over many years and also took the opportunity to thank all those who had served on the Leaders’ Committee during the four year cycle from 2010. The Chair also thanked the officers of London Councils for their work over the previous four years.

1. Declarations of interest

No interests were declared.

2. Minutes of Leaders’ Committee held on the 11 February 2014

Leaders’ Committee agreed the minutes of Leaders’ Committee held on the 11 February 2014.

3. Financial and Wider Devolution: Growth Deal

The Chief Executive introduced the report saying:

- The most immediate opportunity to secure devolution in the economic sphere continued to be the proposed Growth Deal, working with the Mayor of London through the London Enterprise panel (LEP)

- Following the LEP’s initial submission, the proposals had been refined and a business case prepared following intensive work with leading members, chief executives, groups of boroughs and the GLA • London Councils advocated public service reform alongside its Growth Deal bid

• The proposals for devolved powers, refined to take account of members’ comments and feedback from ministers were set out in the draft chapter entitled ‘New Levers and Influence’ which was attached as an appendix to the report. It covered: o Skills o Welfare to Work including employment programmes o Housing Investment and Supply

• The proposals would be considered by the LEP on 13 March 2014

• In support of the submission, Leaders’ Committee on 11 February 2014, agreed in-principle to developing the readiness of borough groupings, subject to government offering tangible devolution through the Growth Deal negotiations. The Executive on 25 February 2014 went on to consider a more detailed set of principles to underpin this commitment, which it recommended be put to Leaders’ Committee These were also attached as an appendix to the report for consideration.

Cllr Teresa O’Neill (Conservative, Bexley) emphasized the importance of comments made outside of the Leaders’ Committee meeting about the working of the LEP in relation to the Growth Deal and the LEP meeting on 13 March.

Cllr Richard Watts (Labour, Islington) argued for the need to make a more specific case but Cllr Melvyn Caplan (Conservative, Westminster) stressed the need to present a more positive picture mentioning success stories from London.

Cllr Rocky Gill (Labour, Barking and Dagenham) reiterated a point he had made at previous meetings about the importance of freeing up the Mayor’s land-holdings.

Leaders’ Committee agreed:

• That the comments made by leaders on the draft submission appended to the report be conveyed to the LEP to influence their draft. • The principles on strengthening borough groupings also attached as an appendix to the report.

4. Transforming Rehabilitation Update

Cllr Claire Kober (Labour, Crime and Public Protection, Haringey) introduced the report saying that:

• London Councils had been working with MOPAC to influence the implementation of the reforms of the probation service and the report provided an update • The Transforming Rehabilitation reforms would mean that from the 1 June 2014 two organisations would deliver probation services. Existing Probation Trusts would be reorganised into a national public sector Probation Service and 21 new government-run companies, Community Rehabilitation Companies (CRC)s • Thirty per cent of high risk offenders would remain under the national Probation Service but 21 CRCs would be responsible for the supervision and the provision of services for the remaining 70% of low to medium-risk offenders across England and Wales • In October 2013 London Councils had launched “Reducing Reoffending in London: Why investing in local solutions will deliver” • The report welcomed the proposed extension of rehabilitation services to offenders on short term sentences and the government’s commitment to designate new local resettlement prisons • However it made clear London Councils’ real concerns about the national commissioning model that the Ministry of Justice had adopted, including the splitting of the probation service in two • It was clear, though, that the Government was pressing ahead with the reforms, despite London Councils’ concerns and the focus had adjusted to involve engaging with the Ministry of Justice to mitigate the effect of the Transforming Rehabilitation reforms so that they did not negatively impact on local area’s work to reduce crime and reduce reoffending • There were three bidders for the London CRC contract • The London Crime Reduction Board (LCRB) had established a London Reoffending Board taking a strategic overview of the emerging issues • London Councils and MOPAC have been seeking to progress three key areas with the Ministry of Justice: That MOPAC and London Councils would work with the Ministry of Justice to shape and coordinate market engagement for London.

Seeking an advisory role for London partners in the evaluation process for a new provider for London.

Seeking a commitment to developing a shared London governance and oversight structure to take effect after the new contract was awarded.

The Chair commented that he had been working with Mr Stephen Greenhalgh, Deputy Mayor for Policing and Crime on this issue and they shared a commitment to localism in the way this evolved. He was concerned about the effect of the proposals on gang members, local knowledge about whom would not be taken into account if they were apprehended for a minor crime as they would still be treated as a low to medium risk offender despite the risk of violence.

Leaders’ Committee agreed:

- To note the progress outlined in the report and
- That London Councils continued to work with MOPAC to influence the implementation of the reforms and ensure the influence of local government in the delivery of the new arrangements.

5. Pensions CIV Joint Committee: Terms of Reference

The Director, Fair Funding, Performance and Procurement introduced the report saying:

- This report followed from Leaders’ Committee consideration of the last Pensions Working Group (PWG) progress report at its 11 February meeting

- At that meeting, Leaders’ Committee had agreed the recommendations of the PWG and resolved to endorse and recommend to each local authority which decided to participate that, a representative body, in the form of a new Sectoral joint committee (the “Pensions CIV Joint Committee”), be established to act as a representative body for those local authorities that resolved to participate in the arrangements

- It was required that this new joint committee had terms of reference, and a proposed form of these, which could be amended from time to time as required, was attached as an annex to the report for consideration and agreement • There may be a need to review London Councils’ standing orders and terms of reference more generally to ensure they took account of the issues raised by the establishment of the Pensions CIV joint Committee.

Leaders’ Committee agreed, in principle, the Pensions CIV Joint Committee terms of reference attached as an annex to the report, in anticipation of sufficient London local authorities agreeing the recommendations of the 11 February report, and the incorporation of the ACS Operating company, which would predicate the need for the establishment of this Pensions CIV Joint Committee.

6. Business Plan 2014/15

The Chief Executive introduced the report saying that the plan, which had been agreed by the Executive on 25 February had been developed through a series of meetings between the Chair and the portfolio-holders. Its detail may need to be reviewed after the elections in May.

Leaders’ Committee agreed to note the content of London Councils Business Plan for 2014/15.

7. London Councils Business Plan: Portfolio Holder Progress Reports

Leaders’ Committee agreed to note the progress against Business Plan targets.

8. Minutes and Summaries

Leaders’ Committee agreed to note the minutes and summaries

• Transport & Environment Sub-Committee held on 13 February 2014.

### Action Points

| Item | Action | Progress | |------|--------|----------| | 3. | Financial and Wider Devolution: Growth Deal | PAPA/Strategic Policy | Principles fed into LEP on 13 March | | | Take the draft submission forward to the LEP meeting on 13 March with the principles on strengthening borough groupings | | | | 5. | Pensions CIV Joint Committee: Terms of Reference | PAPA/Fair Funding | | | | Terms of reference agreed. | | | Leaders' Committee

London Infrastructure Investment Plan 2050

Report by: Dianna Neal\
Job title: Head of Economy, Culture and Tourism

Date: 15 July 2014

Contact Officer: Dianna Neal

Telephone: 020 7934 9819\
Email: dianna.neal@londoncouncils.gov.uk

Summary This paper provides background information on the development of a London Infrastructure Investment Plan to 2050 by the Mayor. It sets out the objectives and scope of the Plan, headline findings of the work to date and proposed governance arrangements for implementing the Plan once it is finalised.

Recommendations That Leaders’ Committee notes the report and uses this as a basis for discussion about the Plan with Isabel Dedring, Deputy Mayor for Transport at the Leaders’ Committee meeting. London Infrastructure Investment Plan 2050

Background

1. The Mayor is developing a long-term infrastructure investment plan to 2050. Isabel Dedring, Deputy Mayor for Transport, Fiona Fletcher-Smith, Executive Director for Development, Enterprise and Environment and Jeremy Skinner, GLA Senior Manager for Growth and Enterprise, will be attending Leaders’ Committee to present and discuss the key findings of this work. These findings will form the basis of an Interim Report on the Infrastructure Investment Plan that will be launched by the end of July 2014 for formal consultation with stakeholders, including London boroughs.

2. There have been three major drivers for this work:

   - **The Mayor’s Vision 2020**, which sets out the ambition to make London the best place to work, live, play, study, invest, and do business. World-class infrastructure provision that meets the city’s needs is a critical element of the vision.
   - **The London Finance Commission** (May 2013) recommended that the Mayor, working with London Councils, the boroughs and the London Enterprise Panel (LEP), should develop and maintain a long-term, high-level capital investment plan for the city;
   - **The need for better strategic coordination of infrastructure delivery**. Strategic coordination is the exception rather than the rule. London’s growth is not sufficiently acknowledged by third parties, especially the utility regulators and their sponsor government departments. External parties such as London First in their 2010 report ‘World Class Infrastructure for a World City’ have called for more London-wide strategic planning.

3. The Plan’s objectives are to:

   - Present recommendations to ensure London’s infrastructure requirements to 2050 are articulated, costed and funded;
   - Demonstrate to Government, Londoners and investors that infrastructure is a key priority and that London has a clear plan to meet the demands of its growing population and increasing population density and remain a leading world city;
   - Provide the Mayor and other London leaders with the information to understand and critically appraise London’s infrastructure delivery.

4. The Plan will be broad in its scope. The final report will present the strategic infrastructure needs for:

- **Transport**, including railways and stations (underground, overground, light and high-speed), roads (bus, car, cycling, pedestrian, street lighting), aviation, water, and fuel stations;
- **Energy**, electricity, gas and including renewables;
- **Water**, including potable water and sewerage;
- **Waste**, recycling and recovery facilities;
- **Telecoms**, focusing on broadband;
- **Green Infrastructure**, multifunctional green spaces and urban greening;
- **Social Infrastructure**, covering housing and schools.

5. It will provide a bottom up assessment of the costs of London's infrastructure requirements across each of these sectors (covering both public and private investment) and the funding and finance options to pay for them. The plan will also consider a range of scenarios for the level and pattern of growth within London, including growth in or beyond London and a range of population growth projections.

The plan will also be an opportunity to:

- Lobby for fiscal devolution to London and the proposals of the London Finance Commission, as it is likely to show that meeting London's infrastructure needs cannot be met by current methods of financing. Greater long term financial planning, as well as London having the ability to generate its own revenues, will be needed;
- Put London ahead of the curve in its infrastructure planning and capacity. For example, Crossrail 1 is expected to be at capacity when it opens;
- Provide a basis for future iterations of the London Plan;
- Seek political agreement on the city's long-term infrastructure needs across London and with national government.

**Headline findings**

6. Some of the headline findings are set out below. They show both short term and long term infrastructure challenges for London. At the time of writing this report, the GLA is finalising the precise figures and costs for the Interim report: • London’s capital investment requirements are projected to increase significantly as a percentage of its Gross Value Added (GVA) – to 8% of GVA between 2021 and 2025; with housing and transport making up the majority of this investment;

• The expected impact of increased population growth and density on infrastructure will result in 50-60 per cent increase in trips made on public transport, with Underground and rail increasing by 60 and 80 per cent respectively. It will also result in a need for an estimated 50,000 new homes a year between 2020 and 2050; (1.5 m new homes in total) and an additional school age population equivalent to an extra 300 new primary schools and 130 new secondary schools by 2050;

• A significant increase in rail capacity will be needed both on orbital routes within London and radial links through London and into surrounding areas, with a 70 per cent increase in capacity on London’s radial lines needed to support employment growth in central London. The road network will need major investment;

• The energy demands of the city will increase by around 17-20 per cent by 2050, with a significant shift away from gas to electricity. More decentralised energy production will be needed and at least eight new substations and heat networks are needed in the short term to service demand in central London;

• London’s demand for water is expected to exceed supply as early as 2014. There will be a significant increase in flood risk because of climate change, aging flood risk management assets and population growth. The Infrastructure Plan will call for updated long term (25 year) flood risk management plans for each catchment area in London, developed by London boroughs, the Mayor and the Environment Agency;

• Green space should be considered as infrastructure. It will come under increasing pressure and the Plan will propose a co-ordinated, strategic approach to it;

• The Plan will propose moving towards a ‘circular economy’ to better manage waste and resources. It suggests the need for 100 new waste management facilities by 2050 but at a smaller scale than current waste facilities;

• The plan will not attempt to predict new technological advances but will try to ensure that it is flexible enough to adapt to new developments. It will also consider how to make better use of existing technology such as big data.

______________________________________________________________________

1 Where waste is largely designed out of products, which are designed to be reassembled and reused Infrastructure governance and delivery

7. Currently there is no effective mechanism to bring the key players (deliverers and regulators) together to better integrate the delivery of London’s infrastructure. The Plan will propose that the Mayor convenes a London Infrastructure Delivery Board to do this.

London Councils’ input to date

8. London Councils has fed into discussions on the development of the Plan in the followings ways: • London Councils submitted a response to the GLA’s call for evidence in December 2013, building on our response to the Mayor’s 2020 Vision, in which London Councils collated a list of borough infrastructure priorities. The response in December stressed the need for this to be a shared strategic plan between the Mayor and London boroughs, as well as business, and to consider smaller scale projects alongside flagship infrastructure schemes; • Through discussions at the London Infrastructure Group (a Working Group of the London Enterprise Panel). The group is overseeing the LEP’s input into the Plan and London Councils has had two members on this Group; both have been invited to attend an external advisory group on the infrastructure plan. • London Councils officers, alongside borough officers, attended a stakeholder event about the development of the Plan in December 2013. London Councils lead member for Infrastructure spoke at this event.

Further development of the Plan

9. Following the consultation on the Interim report during summer and autumn, the Mayor will launch the Plan at the end of 2014.

Recommendations

10. It is recommended that Leaders’ Committee notes the report and uses this as a basis for discussion about the Plan with Isabel Dedring, Deputy Mayor for Transport at the Leaders’ Committee meeting. Financial Implications for London Councils There are no financial implications for London Councils.

Legal Implications for London Councils There are no legal implications for London Councils.

Equalities Implications for London Councils There are no equalities implications for London Councils

Appendices - None

Background Papers GLA presentation on London Infrastructure Investment Plan 2050 for Engagement Event, December 2013

GLA presentation on London Infrastructure Investment Plan 2050 to the London Infrastructure Group, June 2014

GLA Headline briefing on the Long Term Infrastructure Investment Plan for London, June 2014 Leaders Committee

Governance of Fiscal Devolution Item no: 5

Report by: Doug Flight Job title: Head of Strategic Policy Date: 15 July 2014 Contact Officer: Doug Flight Telephone: 020 7934 9805 Email: Doug.flight@londoncouncils.gov.uk

Summary

This report provides background information to set the context for the presentation by Professor Tony Travers.

Tony Travers chaired the independent London Finance Commission, which reported in May 2013 and made a number of measured recommendations for devolved tax and investment mechanisms for the capital, which could provide a robust platform for promoting growth and prosperity.

The Commission emphasised that a robust governance mechanism would be needed in London to make fiscal devolution possible.

London Councils, which was represented on the Commission, has subsequently worked with the Mayor and the Core Cities to press for fiscal and wider devolution to England’s cities.

The need for governance mechanisms and associated implementation plans was identified by this year’s CLG Select Committee inquiry into fiscal devolution. This need was echoed in the preparations for the Growth Deal submission.

A joint letter from London Councils Chair Jules Pipe and Mayor of London Boris Johnson to CLG Committee Chair Clive Betts is attached as Appendix A, which sets out steps that might be required to accommodate fiscal devolution.

Joint letters to the Chancellor, Shadow Chancellor and Chief Secretary to the Treasury are also attached as Appendices B, C and D. These point to the link between the LFC’s findings and topical policy discussions linking cities to growth.

Recommendations

Leaders’ Committee is asked to consider and comment on the presentation by Professor Tony Travers. Governance of Fiscal Devolution

Introduction

1. Tony Travers chaired the independent London Finance Commission, which reported in May 2013 and made a number of measured recommendations for devolved tax and investment mechanisms for the capital, which could provide a robust platform for promoting growth and prosperity.

2. The Commission considered the question of the appropriate spatial level for each of the individual elements of financial devolution, and set out principles for shared decision making about the use of any such revenues.

3. London Councils, which was represented on the Commission, has subsequently worked with the Mayor and the Core Cities to press for fiscal and wider devolution to England’s cities.

4. The Commission emphasised that a robust governance mechanism would be needed in London to make fiscal devolution possible. The need for governance and associated detailed implementation plans were identified by this year’s CLG Committee inquiry into fiscal devolution. This need was echoed in the preparations for the Growth Deal submission.

5. A joint letter from London Councils Chair Jules Pipe and Mayor of London Boris Johnson to CLG Committee Chair Clive Betts is attached which sets out steps that might be required to accommodate fiscal devolution.

Finance Commission Overview

6. The London Finance Commission made a number of specific recommendations for devolution which London Councils fully supports, noting that in each case any devolved taxes would be offset by reductions in government grant: a. **Business rates**: should be fully devolved to London government, including the timing of revaluations and the freedom to determine issues such as tax-breaks and discounts. b. **Council tax**: should be retained locally and London government should have the freedom to hold periodic revaluations. c. **Other property taxes (including stamp duty):** should be devolved to London government which would have responsibility for their operation and impact.

d. **Borrowing ceilings:** on the GLA group should be removed and the government should pledge to place no further borrowing restrictions on boroughs.

e. Government should distinguish between borrowing that will be used to promote growth or reduce public expenditure and thus be repaid, and other kinds of debt.

f. **Restrictions:** around tax increment financing should be relaxed.

g. **Fees and charges:** boroughs should be able to fully recover costs, including an exemption on nationally set charges.

**Governance Principles**

7. The Finance Commission’s report pointed out that if its proposals on financial devolution were to occur, it would be necessary to make decisions about the allocation of new financial powers between the two parts of London government:

   “Such an allocation would involve an agreement about what it would be appropriate for: • the Mayor/GLA to determine alone • the Mayor/GLA and boroughs to determine collectively • the Mayor/GLA and groups of boroughs to determine collectively • groups of boroughs to determine collectively • individual boroughs to determine alone.

To secure formal and long-term agreement on such matters would require the development of new governance systems and structures that are sufficiently robust to cope with the variety of possible situations, but sufficiently simple to be efficient and without the need to invent additional structures as new and unforeseen situations arise.

The purpose of such new governance arrangements is to provide assurance to all parts of London government and to increase effectiveness. It is possible to imagine some principles that should guide the creation of a system that meets these needs:

I. **Elected Leaders of all London local authorities and the London Mayor must have a stake in the success of London as a whole and all of London.**

II. **The system must ensure that no one borough or groups of boroughs can be excluded from the benefits of London’s success, or become powerless to address local needs.**

III. **The interests of the Mayor cannot be over ridden by the boroughs, or vice versa.** IV. The system must enforce binding decisions and these decisions must reflect a clear consensus. This is likely to require less than unanimity, but significantly more than 50 per cent +1.

V. The system must be broadly consistent with the sort of requirements central government might have in order to trigger such devolution.

VI. The result of these principles is likely to be complexity and so a further principle will be needed in order to meet central government's likely tests for good governance:

VII. Arrangements must either prevent or break gridlock in decision making in order that all London leaders are pre-disposed to find agreement.

Taking Forward the Supporting Arrangements for Fiscal Devolution

08. Tony Travers discussed outline thinking on the potential shape of supporting governance arrangements at an informal meeting for members of London Councils Executive earlier in the year and at a separate seminar with leading members and senior officials at City Hall. Following these preliminary seminars, Professor Travers will set out current thinking for consideration by Leaders’ Committee.

09. The CLG Select Committee recently conducted an inquiry into “Fiscal Devolution to Cities and City Regions” and took evidence earlier this year from the London Councils’ Chair and the Mayor of London. The Committee asked searching questions about the proposed governance arrangements for fiscal devolution in London and implicitly about the capital’s readiness for fiscal devolution. A joint letter from London Councils chair Jules Pipe and Mayor of London Boris Johnson on what future arrangements might be needed to accommodate fiscal devolution is attached.

10. The CLG Select Committee report ‘Devolution in England: the case for local government’ is likely to be published shortly before Leaders’ Committee meets and it is expected to comment on:

- The principle of fiscal devolution.
- How central and local government might work together to practically advance decentralisation and devolution.
- The governance and accountability arrangements that would be required for fiscal devolution.
- What mechanisms might be needed to manage the national fiscal implications of devolution?

11. A number of other high profile events have recently led to increased debate and media coverage linking cities to the growth agenda. These interventions include the recent speech by the Chancellor, Rt Hon George Osborne MP and the conclusions of Lord Adonis’s Growth Report. This provided the opportunity for joint letters from the Chair of London Councils, the Mayor of London and the Chair of the Core Cities Group to:

i. The Chancellor (Appendix B) ii. The Shadow Chancellor (Appendix C) and iii. The Chief Secretary to the Treasury (Appendix D)

The letters seek to build on the joint work in hand to promote greater local control of taxes raised in cities to enable them to invest and drive the national economy, specifically through the devolution of property taxes.

Conclusion

12. Support for joint governance proposals by both the Mayor and Borough leaders will be important for influencing Government by demonstrating unity of purpose across London Government. To maximise influence in advance of the general election and likely comprehensive spending review in 2015, these proposals would ideally be ready in autumn 2014.

13. Leaders’ Committee is asked to consider and comment on the presentation by Professor Tony Travers.

Financial implications for London Councils None

Legal implications for London Councils As work to develop robust shared governance structures for financial devolution continues any recommendations would be subject to detailed legal advice.

Equalities implications for London Councils There are no direct equalities implications for London Councils as a result of this paper.

Attachments

Appendix A: Letter from London Councils Chair Jules Pipe and Mayor of London Boris Johnson. Appendix B: Joint letter from the Chair of London Councils, the Mayor of London and the Chair of the Core Cities Group to the Chancellor.

Appendix C: Joint letter (signatories as above) to the Shadow Chancellor.

Appendix D: Joint letter (signatories as above) to the Chief Secretary to the Treasury. Dear Clive

The governance of fiscal devolution in London

Thank you for inviting us to give evidence to the Communities and Local Government (CLG) Committee’s inquiry into fiscal devolution. We welcomed the opportunity to emphasise how fiscal devolution for London will enable us to manage its growth better, to reform the capital’s property taxes and to link more of London’s taxes to its public services. It would make London government more accountable, improve public expenditure prioritisation, allow for greater coordination at the city level and incentivise growth.

During our respective oral evidence sessions, we assured the Committee that London Boroughs and the GLA had been working productively and jointly on the practical implementation of a new governance framework. This has continued since the Committee’s hearing and we therefore wanted to update you on progress.

The model for fiscal devolution is already well developed in Scotland and Wales. We have no doubt that London, a significantly larger economy than both those nations put together, can manage the relatively modest fiscal devolution package proposed by the London Finance Commission (LFC). We are satisfied that London government can put in place an appropriate and accountable governance framework were property taxes devolved to the capital.

In order to develop this, a number of steps are required. First and foremost, national government needs to commit to fiscal devolution in some form. Without central government commitment, our call would be in vain. There is now a groundswell of support for English devolution across London, the Core Cities and beyond. The LFC set out a powerful argument for devolution, backed by independent experts from a range of backgrounds. Its core themes have been taken up in other reviews that are ongoing. Our arguments have largely been accepted by the Government in the Welsh context, with the publication of the Wales Bill on 20 March, which will largely complete the devolution of property taxes away from Whitehall. Given this precedent, we believe that there can be no strong practical arguments against fiscal devolution in England, and strong arguments for it, to allow the UK to move away from our highly centralised state, which places the UK as an extreme outlier among OECD nations. Second, if the Government committed to considering some form of devolution, there would need to be an agreement regarding which organisations would be party to the ensuing negotiations, which we assume would not happen until after the General Election in 2015. We consider that the Government, Congress of Borough Leaders and the Mayor of London, represented by officials from Whitehall (CLG and HM Treasury) and officers from London Councils (the representative body for London local government) and the Greater London Authority respectively, would be the principal parties (with the London Assembly also having an important role, which is set out later).

The scope of any such initial negotiation would need to agree:

- which taxes to devolve. In our view, initially at least, all property taxes should be within scope alongside some other minor taxes, again as per the London Finance Commission, for want of any doubt.
- How these taxes would be set and subsequently the yield retained by each part of London government.
- Borrowing powers and freedoms within the Local Government Prudential Code
- The ringfencing of London taxes within London.
- Which grants would be switched off or reduced in lieu of taxes devolved.

In our view, an initial negotiation would exclude how devolved revenues would be spent by different parts of London government and new service responsibilities (although these might be subject to a separate, even parallel, negotiation, depending on the wider climate for devolution at the time).

Potential framework

Third, we would seek to establish some agreement on principles early on. Following careful consideration, London government is already agreed on the following set that reflect and build on those set out in the LFC report:

01. **Each element of London government should have a stake**: Elected leaders of all London local authorities and the Mayor of London must be able to feel confident about the governance arrangements for the new finance system

02. **No exclusion**: No one borough or group of boroughs can be excluded from the benefits of London’s success or become disempowered from addressing local needs.

03. **No over-riding**: Interests of the Mayor cannot be overridden by the boroughs or vice versa.

04. **No deadlock**: Arrangements must prevent or break deadlock. We believe that this can be achieved through suitable voting arrangements and clarity about which tier of government is responsible for decision-making, as reflected in the principles below.

05. **Enforcement**: The system must enforce binding decisions and these decisions must reflect a clear initial consensus – even if there are disagreements from time to time about individual decisions.

06. **Simplicity and clarity**: The reformed system should be as simple as possible. It should avoid the need for annual decision-making between different sections of London government. It should seek to distinguish clearly the responsibilities of the GLA, Boroughs and London Assembly.

07. **Stability...**: Existing responsibilities should be maintained where possible.

08. **...But potential for reform.** Provisions in the ‘devolution settlement’ should enable, by agreement, periodic property tax reform and changes to any within-London distribution arrangements. Such reforms would be distinct from the ‘Day 1’ operation of a devolved system. There should also be a presumption that the more significant reforms were proposed, the longer they would be phased in.

09. **Practical operations**: Decisions would be taken by the Mayor or Borough politicians as appropriate. However, a joint GLA and London Councils Officer Group would provide standing, technical advice and support for politicians to decide on matters where there is significant joint interest under the above arrangements. This might be independently chaired.

10. **Decision rules**: Any new system would require a set of decision rules, some of which would be reflected in legislation. For instance, Parliament might legislate for periodic property revaluations to be carried out by devolved authorities. There are various options for the rulebook governing changes within London following devolution but here is one example:

- Mayor would need to agree to any decision and by converse would have a veto
- Boroughs would need to agree to any decision by their own rules (e.g. two thirds majority)
- The London Assembly would retain its existing powers to amend or reject the Mayor’s tax and spending decisions, which would be enhanced commensurate with the increase in the Mayor’s powers.

**Devolution in practice**

We have also considered what might result following these negotiations in practical terms.

- We would envisage all of London’s business rates to be wholly retained within London. This would significantly enhance the incentives on London government as a whole to grow the business property tax base – and the wider economy – on which these taxes depend.

- Stamp duty should be devolved entirely to London with the potential for it to be reformed, for instance at least removing its cliff edges. It is likely that given its variance across the capital and relative volatility stamp duty would be principally, but not necessarily exclusively, a tax under the control of the Mayor of London.

- Council tax revaluations could be enforced by legislation. A revaluation where the proceeds of council tax were entirely retained within London would potentially be manageable. New higher (and potentially lower) council tax bands could be established and the system overall be made less regressive and more progressive. An undeveloped land tax could be introduced by boroughs to incentivise development and disincentivise unproductive land banking. Clearly careful consideration needs to be given to the design of such a tax, but it is important that all tools are available within the capital to increase house building to the levels required to support London’s growing economy and rapidly expanding population. • A hotel bedroom tax could be set by local authorities within London to enable a source of revenue. Such taxes are common in other cities and countries.

• New TIF zones could be created within which the future yield of some or all of the above could be used to fund new infrastructure or other expenditure that will add to growth. TIF is a highly effective policy instrument that is woefully underused currently. Two examples are now emerging in London, at Battersea Nine Elms, and at Cricklewood in Barnet. More, and a greater diversity of, TIF initiatives would be enabled by tax devolution, which would themselves enhance economic growth in the capital.

It is our strongly held view that these are all worth exploring fully in a mature dialogue with national government, whichever party or parties are in power following the next General Election.

We hope that you will recommend without any ambiguity that an incoming government must commit to significant English fiscal devolution, develop a comprehensive framework to enable such devolution to take place across the country, and in London’s case, agree a timetable for negotiations with London government in order to achieve a lasting agreement.

With best wishes,

Boris Johnson Mayor of London

Mayor Jules Pipe Chair, London Councils Dear George

We are greatly encouraged that the importance of cities to the UK economy is clearly understood and the promise of further powers being granted to cities is moving up the political agenda. As you are aware, we have been jointly campaigning for greater local control of taxes raised in cities to enable them to invest and drive the national economy.

Your recent speech setting out a vision for a northern “powerhouse” of the British economy and your recognition that cities will deliver much needed jobs and growth is therefore welcome. However, we believe that the proposals are still too timid. The era of tremendous civic leadership, the nineteenth and early twentieth century, was marked by much greater autonomy than even we would propose. We therefore urge you to support our modest proposals for granting greater fiscal autonomy to our cities, which we believe are appropriate for the 21st century.

Building on the work of the London Finance Commission, whose recommendations we fully endorse, we believe the next Government and Parliament should engage with us in a mature dialogue regarding the devolution of all property taxes (council tax, business rates, stamp duty, annual tax on enveloped dwellings, capital gains property development tax) and local discretion to introduce other minor taxes such as a hotel bedroom tax. Combined, these would provide cities with the means and incentives to grow their economies, including the appropriate balance of skills, infrastructure and other economic development expenditure, and therefore their tax bases. They would also be able to reform and set the mix of taxes and tax rates, subject to protections for businesses and residents, in these limited areas of tax policy, again in a way appropriate for their economies. Our proposals would also be fiscally neutral to the Treasury as devolved taxes would be met with an equal and opposite reduction in central government grants.

We would therefore like you to undertake the necessary policy and economic analysis to develop a framework for English devolution, which has been successfully done for the devolved countries of Scotland, Wales and Northern Ireland, so that we can develop the nation in a mature partnership between national and local government.

With best wishes,

Boris Johnson Mayor of London

Cllr Sir Richard Leese Chair of Core Cities Group and Leader of Manchester City Council

Mayor Jules Pipe Chair, London Councils Dear Ed

We are greatly encouraged that the importance of cities to the UK economy is clearly understood and the promise of further powers being granted to cities is moving up the political agenda. As you are aware, we have been jointly campaigning for greater local control of taxes raised in cities to enable them to invest and drive the national economy.

The final report of the Adonis Review and the recognition that cities will deliver much needed jobs and growth is therefore welcome. However, we believe that the proposals are still too timid. The era of tremendous civic leadership, the nineteenth and early twentieth century, to which Lord Adonis makes reference, was marked by much greater autonomy than even we would propose. We therefore urge you to support our modest proposals for granting greater fiscal autonomy to our cities, which we believe are appropriate for the 21st century.

Building on the work of the London Finance Commission, whose recommendations we fully endorse, we believe the next Government and Parliament should engage with us in a mature dialogue regarding the devolution of all property taxes (council tax, business rates, stamp duty, annual tax on enveloped dwellings, capital gains property development tax) and local discretion to introduce other minor taxes such as a hotel bedroom tax. Combined, these would provide cities with the means and incentives to grow their economies, including the appropriate balance of skills, infrastructure and other economic development expenditure, and therefore their tax bases. They would also be able to reform and set the mix of taxes and tax rates, subject to protections for businesses and residents, in these limited areas of tax policy, again in a way appropriate for their economies. Our proposals would also be fiscally neutral to the Treasury as devolved taxes would be met with an equal and opposite reduction in central government grants.

We would therefore like you to undertake the necessary policy and economic analysis to develop a framework for English devolution, which has been successfully done for the devolved countries of Scotland, Wales and Northern Ireland, so that we can develop the nation in a mature partnership between national and local government.

With best wishes,

Boris Johnson Mayor of London

Cllr Sir Richard Leese Chair of Core Cities Group and Leader of Manchester City Council

Mayor Jules Pipe Chair, London Councils Dear Danny

We are greatly encouraged that the importance of cities to the UK economy is clearly understood and the promise of further powers being granted to cities is moving up the political agenda. As you are aware, we have been jointly campaigning for greater local control of taxes raised in cities to enable them to invest and drive the national economy.

The Government’s recognition that cities will deliver much needed jobs and growth is welcome. However, we believe that the proposals are still too timid. We therefore urge you to support our modest proposals for granting greater fiscal autonomy to our cities, which we believe are appropriate for the 21st century.

Building on the work of the London Finance Commission, whose recommendations we fully endorse, we believe the next Government and Parliament should engage with us in a mature dialogue regarding the devolution of all property taxes (council tax, business rates, stamp duty, annual tax on enveloped dwellings, capital gains property development tax) and local discretion to introduce other minor taxes such as a hotel bedroom tax. Combined, these would provide cities with the means and incentives to grow their economies, including the appropriate balance of skills, infrastructure and other economic development expenditure, and therefore their tax bases. They would also be able to reform and set the mix of taxes and tax rates, subject to protections for businesses and residents, in these limited areas of tax policy, again in a way appropriate for their economies. Our proposals would also be fiscally neutral to the Treasury as devolved taxes would be met with an equal and opposite reduction in central government grants.

We would therefore like you to undertake the necessary policy and economic analysis to develop a framework for English devolution, which has been successfully done for the devolved countries of Scotland, Wales and Northern Ireland, so that we can develop the nation in a mature partnership between national and local government.

With best wishes,

Boris Johnson Mayor of London

Cllr Sir Richard Leese Chair of Core Cities Group and Leader of Manchester City Council

Mayor Jules Pipe Chair, London Councils Leaders Committee

Growth Deal, Devolution and Wider Public Sector Reform

Item no: 6

Report by: Doug Flight\
Job title: Head of Strategic Policy

Date: 15 July 2014

Contact Officer: Doug Flight

Telephone: 020 7934 9805\
Email: Doug.flight@londoncouncils.gov.uk

Summary

London Councils recent business plan focussed on both longer-term influencing around fiscal devolution, as well as the more immediate prospects presented by the Growth Deal process, working with the Mayor of London through the LEP.

The details of the London Growth Deal were announced on 7 July 2014 and include approval for a series of 'pilots' which will give London local government the opportunity to demonstrate its ability to deliver on agreed aspects of the growth agenda. The pilots include a particular focus on help for those furthest from work to move into the labour market.

London’s Growth Deal also includes a commitment to opening discussions with London government on the commissioning and design of the next phase of employment support programmes and a commitment that success in the pilots will unlock progressive steps towards further local service integration across London.

The scope of this work might usefully be broadened to focus on wider devolution and public service reform initiatives and chief executives are working closely with London Councils on this agenda. This broader work presents opportunities for influencing General Election manifestos and the likely subsequent 2015 Comprehensive Spending Review.

Recommendations

Leaders’ Committee is asked to:

1. Note the progress with the London Growth Deal, including the pilots and an agreed approach to New Homes Bonus.
2. Note the progress of related work, which seeks to advance London’s aspirations within the wider sphere of devolution & public service reform.
3. Consider and comment on the outline plans for influencing work, based on the wider aspirations set out in this report. Growth Deal for London

Introduction

01. The potential offered by devolution and wider public sector reform has gained increasing recognition within London local government, not least because of the potential to empower London authorities to tackle the financial challenges they face and, in tandem, to tackle the significant economic and social challenges faced by localities.

02. London Councils has focussed recent effort on both longer-term influencing around fiscal devolution, as well as the more immediate prospects presented by the Growth Deal process, working with the Mayor of London through the LEP. The recommendations of the London Finance Commission (LFC) were included within the Growth Deal submission and are also being pursued through the City Centred campaign work with the Mayor and the Core Cities.

03. The details of the London Growth Deal were announced on 7 July 2014 and include approval for a series of ‘pilots’ which will give London local government the opportunity to demonstrate its ability to deliver on the growth agenda. The pilots include a particular focus on help for those furthest from work to move into the labour market.

04. London’s Growth Deal also includes a commitment to opening discussions with London government on the commissioning and design of the next phase of employment support programmes and a commitment that success in the pilots will unlock progressive steps towards further local service integration across London.

05. A common view is now emerging that the scope of this work could usefully be broadened to focus on wider devolution and public service reform initiatives. London chief executives are directly engaged with this agenda and are working through a Devolution & Public Service Reform Group convened at London Councils.

06. This broader work presents opportunities for framing a message about London’s ambitions and capabilities beyond the horizon of the Growth Deal and into the critical period running up to the 2015 General Election and likely Comprehensive Spending Review late next year. Background to the Growth Deal Approach

07. The devolutionary aspects of the London Growth Deal arose from a joint approach with the Mayor of London, to the Chancellor, in July 2013, endorsed by the London Congress. The Chancellor's reply suggested discussing the proposals as part of the recently established Growth Deal process.

08. London Councils developed proposals with the GLA, based on discussions with established London borough partnerships. They were intended to shape a proposition to government that:

    - Empowers boroughs and groups of boroughs to drive faster economic growth through devolving national powers to construct tailored local solutions and interventions boosting jobs, skills, competitiveness, infrastructure and homes.
    - Aligns all of London government including the Mayor, the wider GLA family, including the London Enterprise Panel and the Homes for London Board and the London boroughs.

09. The proposals include a package of measures that:

    - Involve devolution to London as a whole in order to accelerate economic growth.
    - Allow for pan-London co-ordination and strategy.
    - Ensure effective management at the right level through the collaboration of groups of boroughs.

10. The development London local government’s contribution to the bid was overseen by a cross-party member-level grouping, drawn from the London Councils nominees to the LEP, appropriate Executive members and other leading members who are active in the established borough groupings. Further support and technical advice was also provided by a small group of borough chief executives from across London’s sub-regional partnerships, who met regularly in the run up to the March deadline. Regular reports were considered by London Councils’ Leaders Committee and Executive.

Final Growth Deal Submission – March 2014

11. The overall Growth Deal submission, which had been developed through negotiation with the GLA, informed by input from leading members, chief executives and groups of boroughs was submitted to Government at the end of March 2014: In relation to employment programmes and welfare to work, it proposed a high level mechanism for borough groupings to support devolution of mainstream employment programmes. The mechanism would channel budgets devolved to a single London pot, and distribute them through borough groupings. Critically, the proposed approach is based on integrating support services with the broader local offer of employment and skills support, to create personalised wrap-around services, taking claimants on a path from welfare to work. The model envisages groups of boroughs adopting a common operating model, the delivery of which would be locally tailored.

The submission also proposed a number of transitional steps towards full devolution in the form of four potential pilots:

1. An ESA Work Programme Leavers Pilot to deliver employment outcomes with mandated ESA claimants.
2. An ESA ‘Entry’ Pilot to demonstrate improved outcomes for all new ESA claimants who are in the Work Related Activity Group.
3. A Local Support Services Framework Pilot.
4. A Flexible Support Fund Co-commissioning Pilot, to show how groups of boroughs and DWP can effectively co-commission employment services.

In relation to skills devolution, it proposed a mechanism to collate intelligence on skills gaps from businesses at a sub-regional level and use this to influence the LEP. This will support the broader Growth Deal ask for devolution to London which offers pan-London focus on careers, apprenticeships and skills incentives enhanced by intelligence and influence from groups of boroughs ensuring recognition of the skill requirements of particular employment sectors in their areas.

Growth Deal Announcements – July 2014

12. The details of the London Growth Deal were announced on 7 July 2014 and include a package covering:

- building London’s skills
- helping Londoners into sustainable employment
- improving housing supply

The package comprises a range of initiatives, through which the London Enterprise Panel, the Mayor, London Councils and London local authorities will work together with the private sector to promote growth and employment.

13. The headlines in the announcement focus on what has been agreed for delivery in 2015, including a series of ‘pilots’ which have the potential to demonstrate London local government’s ability to deliver on the growth agenda, and which might therefore strengthen the case for further devolution.

14. Throughout the Growth Deal process, London Councils has also emphasised the importance of gaining new freedoms and flexibilities for boroughs and groups of boroughs to focus on delivering growth. In this context, it is significant that we have been able to secure a commitment in the London Growth Deal to opening discussions with Government on the commissioning and design of the next phase of employment support programmes and a commitment that success in the pilots will unlock progressive steps towards further local service integration across London.

15. In relation to employment, the deal sets out how London government partners will work with the Government to jointly design a number of pilots to support hard to reach groups into sustained employment. These include:

- a time-limited pilot for Employment Support Allowance claimants in Central London who have been unsuccessful at finding work through the Work Programme. This will build on a locally led and integrated approach to move those furthest from work into the labour-market and off benefits. Success will unlock a series of progressive steps towards further local service integration across London.

- a mental health and employment integration trailblazer in West London to inform future national and local support for people with mental health conditions.

- a pilot initiative being developed between London Councils, borough groupings and the Department for Work and Pensions locally to explore the potential to co-commission Flexible Support Fund in London across groups of boroughs to improve the strategic use of the fund.

16. In relation to skills, an area where GLA colleagues led the most recent negotiations with Government, the deal sets out commitments to improving the responsiveness of adult skills provision, including the following initiatives:

- A competitive programme for capital investment at Further Education colleges and other skills providers, with a £55m LEP programme of for 2015/16.

- a pilot for a digital skills programme.

- trialling new approaches to incentivising businesses to take on apprentices; informing careers advice to give young people about the education, employment and training opportunities and link employers with education providers;

17. In relation to housing supply, the deal references London’s Housing Zones initiative and contains provisions for loans to developers for investment in building affordable housing and for estate regeneration, along with collaborative working on the release and development of public assets for development.

18. Negotiations on key aspects of the pilots will continue over the summer to resolve the more complex operational details of these agreements. In respect of the pilot for Employment Support Allowance claimants, for example, it has been agreed that a joint team (Central Government and London government) will quickly be established to scope and agree the design of the initiative by September 2014. This will include the development of performance measures to independently evaluate the success of local action and hence unlock a series of progressive steps towards further local service integration across London. Future review points will be agreed as part of the joint scoping phase and will align with national spending and policy making decisions.

Broader Growth Deal: New Homes Bonus Top-slice

19. The London Growth Deal submission contained a wide range of proposals, stretching beyond the devolutionary proposals mentioned above. In particular, it included proposals agreed by Leaders’ Committee in March 2014 for the treatment of NHB top-slice(^1), together with principles and a process for distribution of 80% of this funding to boroughs via the LEP. The agreed vehicle was a ‘LEP Programme’, with targets and quality assessment co-designed between boroughs, London Councils and the GLA. It also included:

- achieving a broad correlation between what a borough contributed to the NHB top-slice, and what it would receive from the LEP Programme, if proposals met an agreed quality threshold.
- developing a strategic package of proposals across London boroughs, in line with LEP priorities.

(^1) In December 2013 the Chancellor announced that London boroughs would be required to transfer a proportion of their New Homes Bonus (NHB) to the GLA, for the funding of the London Enterprise Panel (LEP) in 2015-16. This will equate to £70 million in 2015-16. 20. In May 2014, the Government responded to the consultation process around the NHB top-slice. In its response, the Government strengthened the principle of correlation set out in the Growth Deal – stating that NHB funds raised in the borough will be spent within the borough through this process. This means that the LEP Programme will cover the full £70 million in 2015/16. Subsequent discussions with CLG officials suggest that the Government still expects London boroughs to work together to develop a strategic package of proposals to be agreed with the LEP and the GLA, in line with LEP priorities and using the sort of process set out in the Growth Deal submission. The LEP Programme will continue to be co-designed by boroughs, London Councils and the GLA.

21. The Growth Deal announcement confirmed that: ‘£70m of London’s New Homes Bonus will support a London Enterprise Panel programme of activity in 2015/16, agreed between the Greater London Authority and the London Boroughs. This will support the London Enterprise Panel’s priorities set out in its Jobs and Growth Plan - apprenticeships, skills and training; digital, creative, science and technology; places of work; high streets; resilience / low carbon; business support; and unlocking development’.

22. Consequently, London Councils is continuing to work with borough Chief Executives and Directors of Regeneration to develop the LEP Programme for 2015/16. The timetable is to co-design an evaluation and performance framework for the LEP Programme by end of July 2014 and to submit a package of proposals for consideration by the LEP in October 2014, for projects to start in April 2015.

**Broader Work on Devolution & Public Service Reform**

23. The Growth Deal approach has shown that devolving authority to London enables London government to design services that deliver more for less in the economic sphere. This helps to address the financial pressures on local government and other public services. Extending this approach to other services could deliver both better services and better use of resources. This opportunity is most visible in addressing issues of “complex dependency” where people have multi-faceted chronic problems requiring multi-agency collaboration. Troubled Families, offender rehabilitation and the integration of health and social care all provide examples.

24. London chief executives are directly engaged with this agenda and are working through a Devolution & Public Service Reform Group, recently convened at London Councils. This group has been established to support the work of London Councils members, in advancing the case for wider devolution and public service reform, with Government.

**Influencing Work on Wider Devolution**

25. Outline plans have been assembled for London Councils' influencing work in 2014/15, based on the wider aspirations set out in this report. This builds on London Councils' established programme of advocacy work on behalf of the boroughs, in seeking to influence key decision-makers, and make alliances with key influencers in London and beyond.

26. In addition to London Councils core activity, we agreed (in October 2013) to work together with the Mayor of London and the Core Cities on the City Centred campaign, calling for both greater fiscal freedoms and for the devolution of decision-making over key services. To build on this alliance, London Councils, the Core Cities and the GLA are supporting the RSA’s City Growth Commission, chaired by Jim O’Neill, former chairman of Goldman Sachs Asset Management which will report in October 2014. In addition, London Councils officers are working directly with colleagues in Greater Manchester to strengthen and deepen links.

27. London Councils is also helping co-ordinate messages and events at the Party Conferences among key partners including RSA, Centre for Cities, Centre for London, GLA, Core Cities, LGA and boroughs planning their own presence at the conferences.

28. London Councils group structures offer significant additional potential to influence manifesto development in respect of commitments to fiscal devolution to cities and to greater decision-making over key services to be devolved to localities.

29. London Councils plans to prepare briefings for the party conferences in September/October setting out our key policy positions. We also envisage publishing a summary document at the beginning of the General Election year to further promote those positions publicly and ensure that London’s voice continues to be heard in the run up to the General Election.

30. This will be particularly important in the context of the likely post 2015 Election Comprehensive Spending Review. That event may well be most critical in shaping the degree to which councils can be influential in integrating a range of local public services in the 2015/2020 period. A timeline of key events is set out in Appendix A.

31. The Executive will have the opportunity to shape the proposals and the supporting detail that underpins the proposed influencing work. To help initiate the discussion on taking forward London’s shared aspirations, London Councils’ officers have assembled a summary of key positions, which have been drawn directly from previously agreed policy. This has been set out in the framework and associated policy implications in Appendix B.

Conclusion

32. Details of London’s Growth Deal were announced on 7 July 2014 and include a series of ‘pilots’ which have the potential to demonstrate local government’s ability to deliver on the growth agenda. London’s Growth Deal also includes a commitment to opening discussions with London government on the commissioning and design of the next phase of employment support programmes and a commitment that success in the pilots will unlock progressive steps towards further local service integration across London.

33. It would be timely to broaden the focus of this work to encompass wider devolution and public service reform initiatives, particularly given the preparations for the General Election and likely comprehensive spending review expected in the summer of 2015 and the consequent opportunities for influencing manifestos and post-election spending plans.

34. Leaders’ Committee is asked to:

35. Note the progress with the Growth Deal, including the pilots and an agreed approach to New Homes Bonus.

36. Note the progress of related work, which seeks to advance London’s aspirations within the wider sphere of devolution & public service reform.

37. Note the outline plans for influencing work, based on the wider aspirations set out in this report.

Financial implications for London Councils None

Legal implications for London Councils As work to develop robust shared governance structures for financial devolution continues any recommendations would be subject to detailed legal advice.

Equalities implications for London Councils There are no direct equalities implications for London Councils as a result of this paper.

Attachments

Appendix A: Timeline of Key Events For Influencing Work Appendix B: Draft ‘High-Level’ Policy Position In The Approach To 2015 APPENDIX A Timeline of Key Events For Influencing Work

Ongoing

- Meeting with national party contacts in connection with manifesto development.

July 2014

- 21st Parliamentary Event with LC, GLA and Core Cities (tbc)

September 2014

- 18th Scottish Referendum
- 22nd Labour Party Conf. Manchester – London Councils Fringe event
- 23rd Labour Party Conf. Manchester – LC/GLA/Core Cities Fringe event
- 29th Conservative Conf. Birmingham – London Councils Fringe event
- 30th Conservative Conf. Birmingham - LC/GLA/Core Cities Fringe event

October 2014

- 6th Lib Dem Conference Glasgow – London Councils Fringe event
- 7th Lib Dem Conference Glasgow - LC/GLA/Core Cities Fringe event

November 2014

- 22nd London Councils Summit

December 2014

- 3rd Autumn Statement

2015

- January – Public presentation of London Councils policy positions as part of start of election year public affairs phase.
- March - Budget
- 7th May - General Election
- Comprehensive Spending Review 2015 (could be late summer/early autumn)
- July - LGA conference
- Autumn Statement APPENDIX B: Draft ‘High-Level’ Policy Position In The Approach To 2015

1. To help shape a discussion on taking forward London’s shared aspirations, London Councils officers have assembled a summary of key positions, which have been drawn directly from agreed policy positions.

2. These positions could usefully be nestled within the following overall framework:

   • Our ambition is to realise the dramatic improvements in outcomes and savings which can only be achieved through devolving responsibility for commissioning key services to local level, where the benefits of integration can be realised.

   • This approach can be delivered for a range of personal services across London. They can be transformed by boroughs using the ‘devolve to integrate’ model to deliver personalised solutions to chronic problems.

   • Only at the local level – where people think about places more than professions – can fragmented, uncoordinated services be brought together to tackle the common problems of low productivity and complex dependency.

   • To achieve this, central government needs to step back from delivery and input specification and instead transfer both the risk for tackling a range of chronic problems but also the reward for doing so by delivering innovative transformation of services.

   • Furthermore, we recognise that the investment in the physical infrastructure which is needed to underpin sustainable growth can only be realised when London is freed from piecemeal funding allocations from central government, through greater fiscal devolution.

3. The following more specific policy implications fall from the framework and existing areas of identified interest:

   Skills Provision, Employment Support and Welfare to Work;

   To deliver more Londoners into more jobs, with opportunities for career progression, by devolving skills, employment and welfare-to-work powers, funding and leadership to London government.

   Troubled Families

   To turn around the lives of more families with complex dependency and reduce demand, by embedding the local, multi-agency model developed under this programme and broadening the scope of families that can be worked with.

   Housing

   To raise housing delivery towards the minimum required in London of 43,000 units a year, by extending proposals in the London Housing Strategy to give a firmer guarantee of delivery. Rehabilitation

To reduce reoffending rates in London by ensuring effective local leadership of personalised and integrated offender management and rehabilitation.

Adult Social Care and Health

To improve outcomes for care users, whilst reducing costly emergency admissions, by aligning the incentives of organisations involved in the local health economy to deliver more effective and personalised interventions.

Fiscal Devolution

To secure the long-term investment in physical infrastructure necessary to maintain sustainable economic growth, by winning devolution of fiscal powers as recommended by the London Finance Commission.

Underneath these relatively high level ambitions there are a series of more detailed propositions – as captured in the detailed work of the London Finance Commission, London Growth Deal and other related strategies. Leaders Committee

Proposed Changes to the Governance of the Fire Service

Item no: 7

Report by: Doug Flight\
Job title: Head of Strategic Policy

Date: 15 July 2014

Contact Officer: Doug Flight

Telephone: 020 7934 9805\
Email: Doug.flight@londoncouncils.gov.uk

Summary

The Secretary of State for Communities and Local Government is consulting on proposed reforms of fire service decision making in London.

Following a request made by the Mayor of London, his proposition is to invoke an order using the power provided by the GLA Act, amending the composition of LFEPA so that:

- the number of Assembly members be reduced from eight to six;
- the number of London Borough Councillors be reduced from seven to five and
- the number of Mayoral appointees be increased from two to six.

The closing date is 29 July 2014.

Recommendations

Leaders’ Committee is asked to

1. Comment on the proposals.

2. Agree that a formal London Councils response be developed, drawing on the draft lines set out in paragraph 13. Proposed Changes to the Governance of the Fire Service

Introduction

1. The Secretary of State for Communities and Local Government is consulting on proposed reforms of fire service decision making in London. The closing date for the consultation is 29th of July 2014.

2. The Mayor of London wrote to the Secretary of State requesting that he makes an order under Schedule 28 to the Greater London Authority Act 1999 to amend the composition of the membership of the London Fire and Emergency Planning Authority as follows:

   - the number of Assembly Members be reduced from eight to six,
   - the number of London Borough Councillors be reduced from seven to five
   - the number of Mayoral appointees be increased from two to six.

3. The Mayor of London presented the Secretary of State with a business case for reform, which is attached as Appendix B.

4. The Mayor of London has suggested that the current governance arrangements are not sustainable and is seeking the change in the composition of the membership on the grounds of:

   - Improved democratic accountability
   - Greater clarity in executive-scrutiny responsibilities
   - Better links to budgetary responsibility
   - Greater policy convergence across the GLA Group
   - Achieving efficiencies
   - Access to a wider pool of appointees

5. The GLA’s business case also pointed to the recent CLG Select Committees’ post Legislative Scrutiny of the GLA act 2007 and the Government’s response, which indicate an openness to consider reform of fire service governance in London. The Select Committee recommended reconstitution of LFEPA along the lines of the Mayor’s Office for Policing and Crime (MOPAC), with an appointed Deputy Mayor and a scrutiny role for the assembly. Background

6. The London Fire and Emergency Planning Authority (LFEPA) was established under the Greater London Authority Act 1999. It replaced the London Fire and Civil Defence Authority (LFCDA), a body that comprised one member from each London local authority. At the point of its initiation, LFEPA comprised nine Assembly members and eight borough representatives. Both groups were appointed by the Mayor, with the latter being appointed by the Mayor, on the nomination of the London borough councils acting jointly.(^1) London Councils predecessor body the ALG took on the role of appointing the borough representatives from the outset. The Act required the Mayor to make appointments that reflected the balance of the parties on the Assembly for the Assembly representatives and amongst the councillors elected to the London boroughs for the borough representatives.(^2)

7. The Greater London Authority Act 2007 amended the 1999 Act by reducing the number of Assembly representatives from nine to eight and the borough representatives from eight to seven. The Act also introduced two new places which are directly appointed by the Mayor.

8. The proportionality requirements set out in legislation have, in practice, meant that before the GLA Act 2007 amendments, no incumbent Mayor was able to rely on a majority of members from their own party group on LFEPA (even though the Mayor appoints the chair of the Fire Authority). The Mayor has been able to command the majority of nine members of LFEPA for only approximately half of the time since 2007.

March 2014 Position

9. At the recent Congress Executive, which followed immediately after the Executive on 25(^{th}) March 2014, members made the following points in discussion with the Mayor of London:
   - the value of retaining LFEPA's status as a local authority- there was a clear purpose to this status in the 1999 Act and members believed it worth preserving to help ensure constructive joint working on safety issues in localities;
   - the need to enhance the executive role in order to focus on key, medium term strategic issues;

______________________________________________________________________

(^1) Greater London Authority Act 1999 Schedule 28 1(1)The Fire etc Authority shall consist of seventeen members, of whom—(a) nine (“the Assembly representatives”) shall be Assembly members appointed by the Mayor; and (b) The remainder (“the borough representatives”) shall be members of London borough councils appointed by the Mayor on the nomination of the London borough councils acting jointly.

(^2) Ibid (2)The Mayor shall exercise his power to appoint members under sub-paragraph (1)(a) above so as to ensure that, so far as practicable, the members for whose appointment he is responsible reflect the balance of parties for the time being prevailing among the members of the Assembly.

(3)The London borough councils shall exercise their power to nominate members under sub-paragraph (1)(b) above so as to ensure that, so far as practicable, the members for whose nomination they are responsible reflect the balance of parties for the time being prevailing among the members of those councils taken as a whole. • the need for robust decision-making and the benefits of being clear about how executive and scrutiny roles are played out.

10. Leading members argued that the starting point for a consideration of future governance should be a set of principles that would include, although not be confined to: • strengthening accountability; • ensuring robust decision-making; • reinforcing partnership working with London boroughs; • ensuring transparency of decision-making.

11. Given the timing of the GLA consultation, coinciding with the busy pre-election period, it was not possible to agree a revised proposal with GLA colleagues. There was a view that it would be preferable to see whether London could develop its own shared proposition and to take it to Ministers at that point.

Potential Response

12. Members may wish to consider the development of a formal London Councils response based on the following draft lines:

A) On the Overall Aims i) We agree with the principle of regularly reviewing the governance of the GLA group bodies, including LFEPA. ii) Furthermore, we agree that it is appropriate to examine the case for: ▪ strengthening accountability ▪ ensuring robust decision-making ▪ achieving efficiencies ▪ clarity about how executive and scrutiny roles are played out iii) Nevertheless, we would wish to see the following, equally important aims added to any evaluation of the governance proposals: ▪ reinforcing partnership working with London boroughs, which is more important in delivery terms that policy convergence across the GLA Group ▪ ensuring transparency of decision-making.

On the Substantive Proposals

iv) We are not persuaded that the changes requested by the Mayor of London to the composition of the membership of LFEPA are justified by the business case.

v) Indeed we take the view that the proposals present significant dangers, in particular: A diminution of democratic local influence on decisions about the budget and operating plans of the fire service in London. LFEPA currently raises some £138 million pounds p.a. from its share of the precept.

An erosion of important principle that the fire service and LFEPA are seen as part of the local government family in London as well as being part of the GLA group. The initial GLA settlement was consciously constructed using this model and it is not simply an accident that the governance arrangements are not the same as for other functional bodies, or for policing and crime.

An erosion of constructive joint working on safety and resilience issues in localities.

Reduced transparency of decision-making as a result substituting elected members with unelected Mayoral appointees.

The loss of built-in local authority expertise, talent and local knowledge.

13. A potential response could also include a reference to wider potential implications. For example, it might be considered peremptory to proceed without adequate consideration of the implications of any changes for the future composition of fire and rescue services nationally. Similarly, there may be implications for the potential future role of Police and Crime Commissioners over Fire and Emergency Services.

Conclusion Leaders’ Committee is asked to:

1. Comment on the Secretary of State’s proposals
2. Agree that a formal London Councils response be developed, drawing on the draft lines set out above.

Financial Implications: There are no direct financial implications for London Councils.

Legal Implications: There are no direct legal implications for London Councils. The immediate proposition is that the Secretary of State for Communities and Local Government be asked to invoke an order using the power provided by the GLA Act whereby the composition of LFEPA can be amended. Equalities Implications: There are no equalities implications for London Councils.

Recommendations: Leaders’ Committee is recommended to note the report and consider whether it wishes to respond to the Mayor’s consultation.

Appendix A : Consultation Questions

Appendix B: Letter from the Mayor of London presented the Secretary of State with a business case for reform. Appendix A : Consultation Questions

“Your views are invited on the following questions:

Questions:

1. Do you agree with the Mayor’s overall aims of:

   • Improved democratic accountability • Greater clarity in executive-scrutiny responsibilities • Better links to budgetary responsibility • Greater policy convergence across the GLA Group • Achieving efficiencies • Access to a wider pool of appointees

2. What are your views on altering the composition of the membership of the London Fire and Emergency Planning Authority to achieve these aims as requested by the Mayor of London? Please provide your reasons for either supporting or opposing the Mayor’s proposal.” Rt Hon Eric Pickles MP\
   Secretary of State\
   Department for Communities and Local Government\
   Eland House\
   Bressenden Place\
   London SW1E 5DU

Date: 15 APR 2014

Dear Eric

Reform of fire service decision making in London

Following a full consultation exercise, lasting just over five weeks and involving members of the London Fire and Emergency Planning Authority (LFEPA), members of the London Assembly, London borough Leaders, London MPs and the London branch of the Fire Brigades Union (FBU), and having carefully considered the 31 responses I received, I am writing to request that you invoke the order making power provided by the Greater London Authority (GLA) Act 2007 whereby the composition of the membership of LFEPA can be amended.

I ask that the number of London Assembly members be reduced from eight to six, that the number of London borough councillors be reduced from seven to five and that the number of Mayoral appointees be increased from two to six.

I have enclosed with this letter the business case for reform and a summary of the responses to my consultation exercise, both those in support and those in opposition to my proposal.

I trust that your Department is now able to publish its own consultation exercise for reform of LFEPA so that, should you agree to invoke the order making power, reform can be achieved prior to LFEPA considering its next budget submission to me in October of this year.

I look forward to hearing from you.

Yours ever,

Boris Johnson\
Mayor of London

Enc

Copies to: Brandon Lewis MP, Parliamentary Under Secretary of State, DCLG\
Sir Edward Lister, Chief of Staff and Deputy Mayor for Policy & Planning, GLA The Mayor of London’s business case for reform of LFEPA

Background

01. The GLA Act 1999 sets out that LFEPA has 17 members, split into the following categories:

    - Eight London Assembly members appointed by the Mayor according to political proportionality;
    - Seven London borough councillors appointed by the Mayor according to political proportionality; and
    - Two Mayoral appointees.

02. The Act also provides the Secretary of State for Communities and Local Government with an order making power whereby the membership arrangements outlined above can be varied by adjusting the numbers assigned to each category, provided there remains one more London Assembly member than London borough councillor.

03. The LFEPA membership arrangements, which differ from those of the GLA’s three other functional bodies (engaged in transport, policing and Olympic legacy activities), hamper fire service decision making in London. Reform of the membership is long overdue. In the medium to long term, the Mayor believes that the solution will lie in primary legislation to create a Mayor’s Office for Policing and Crime style model. In the short term, the solution lies in secondary legislation.

04. It was on this basis which the Mayor consulted key stakeholders from 15 March to 11 April 2014. The following groups were consulted (a summary of the 31 responses received is included towards the end of this submission):

    - All LFEPA members;
    - All London Assembly members;
    - All London borough Leaders;
    - All London MPs; and
    - The London branch of the FBU.

05. The Mayor’s case for reform of LFEPA is divided into the following six sections: i. Democratic accountability; ii. Clarity in executive-scrutiny responsibilities; iii. Budget responsibility; iv. Policy convergence across the GLA group; v. Achieving efficiencies; and vi. Wider pool of appointees. i. Democratic accountability

06. The Mayor of London is directly elected by Londoners every four years to run its citywide services and Londoners hold the Mayor to account for the actions the Mayor takes. The function of the elected London Assembly is to scrutinise the Mayor’s decisions and actions.

07. The public bodies in the GLA group (Transport for London - TfL, Mayor’s Office for Policing and Crime – MOPAC, and the London Legacy Development Corporation - LLDC) are subject to a much greater degree of control by the Mayor than the LFEPA, for example, via the Mayor’s powers to set statutory strategies and to exercise wide discretion in making board appointments; arrangements which align well with the Mayor’s electoral mandate.

08. Conversely, the 17 LFEPA Members, whilst directly elected as either an Assembly Member or borough councillor, are not directly elected to their role on LFEPA; rather the Mayor must appoint eight members from the London Assembly and another seven members from the London boroughs, leaving only two discretionary appointments available to the Mayor. The London Assembly members and London borough councillors hold no mandate or electoral accountability to Londoners for the decisions they take in their capacity as LFEPA members.

09. Providing the Mayoralty with a greater degree of control over decision-making at LFEPA, by reducing the number of London Assembly and local government representatives would better represent the Mayor’s clear democratic mandate and would align with the accountability arrangements in place elsewhere in the GLA group.

10. Earlier government reforms to LFEPA, such as those contained in the GLA Act 2007, which gave the Mayor a power of direction of LFEPA, went some way to solidifying and clarifying the Mayor’s role as the executive for the GLA group; a process which has continued to this day with the Localism Act 2011. This proposal for further reform of LFEPA is a continuation of this process and follows a recent House of Commons Communities and Local Government Committee recommendation that LFEPA be subject to further reform.

11. The Mayor’s proposed reform would not only better reflect the democratic accountability of the Mayor and the Mayor’s executive role, it would also strengthen the scrutiny function of the Assembly, as, by reducing or removing Assembly Members’ executive roles on LFEPA, they would be freed up to concentrate on scrutinising Mayoral decisions rather than being constrained in scrutiny terms by being party to those decisions. Scrutiny of LFEPA by the Assembly has also been limited since the Authority’s inception whereas scrutiny of MOPAC and the Metropolitan Police Service is now much greater than when Assembly Members were on the former Metropolitan Police Authority.

12. The Mayor is also proposing to reduce the number of local government representatives by two, again to reflect the Mayoral mandate. The current Mayor was elected in 2008 with a pledge to forge closer working relations between London’s strategic and local government and he has a proven track record on delivering this, for example through the Congress of Leaders and on campaigns such as fiscal devolution, cycling safety and air quality. However, it is the Mayor – and the Mayor alone – rather than the London Assembly or borough councillors who has a democratic mandate on citywide services such as fire. Hence the current system of LFEPA governance needs urgent reform to reflect that Mayoral mandate. ii. Clarity in executive-scrutiny responsibilities

13. As noted above, the House of Commons Communities and Local Government Committee undertook a post-legislative scrutiny of the Greater London Authority Act 2007 and the London Assembly. The key theme of the Committee’s report was the need for greater clarity in executive-scrutiny responsibilities within the GLA, specifically in the sense that Assembly Members should concentrate on scrutiny and not serve on executive bodies that the Assembly scrutinises. As the Committee noted in its report, MPs heard about problems with the operation of LFEPA as part of their inquiry which led to their recommendation that:

*The Government should reconstitute LFEPA along the lines of MOPAC, with a deputy Mayor for Fire and Emergency Planning and a dedicated Assembly committee along the lines of the Assembly’s Police and Crime Committee to scrutinise it.*

14. The Department for Communities and Local Government (DCLG) responded to the Committee’s recommendation to say that:

*The Government accepts that there is scope for reform in this area and is willing to listen to alternative governance models for fire in London.*

15. The Mayor wholeheartedly supports the Committee’s recommendation to reform LFEPA and the Government’s response to it. It is far from a good governance model for London Assembly members to adopt executive positions on LFEPA and then be able to scrutinise those decisions through their Assembly roles. This is particularly stark on budget issues, as demonstrated by issues arising over the savings proposals contained in the Fifth London Safety Plan.

iii. Budget responsibility

16. The Mayor raises the GLA council tax precept and is held accountable for the decisions as to the level at which it should be levied year-by-year. LFEPA makes the second biggest call on the precept – a call which amounts to £138m in the current financial year, 2014-15.

17. The Mayor’s budget guidance for each financial year sets out the expectations as to how the GLA group should seek to meet the Mayor’s policy objectives and to obtain value for money across all their functions. LFEPA members are open in challenging that guidance.

18. As a result of the current system of LFEPA governance, the London Fire Commissioner and his staff are receiving contradictory sets of messages on resourcing issues, one from LFEPA members and one from the Mayoralty.

19. This impasse has been particularly evident during the well documented disagreements between LFEPA members and the Mayoralty on those aspects of the Fifth London Safety Plan which impact on financial savings. This resulted in the Plan taking 18 months to be finalised, leading to unforeseen – and unbudgeted costs – that were ultimately borne by the taxpayer. The Mayor has a strong track record of delivering efficiencies across the GLA group, yet the anomalous LFEPA arrangements make budget planning and efficiency savings much more difficult to deliver.

20. The current position is clearly unsustainable and the taxpayer should not be called upon to pick up the future cost of LFEPA diverging from Mayoral policy. There can only be one financial strategy for the GLA group and the precept which the Mayor is responsible for raising. Recent events have shown that it is simply not feasible to have one strategy for the rest of the GLA group and another for LFEPA.

iv. Policy convergence across the GLA group

21. It is entirely legitimate, and indeed one of the purposes behind creating the Mayoralty, that any Mayor would seek a degree of policy convergence across the GLA group. One example of that for the current Mayoralty is achieving efficiencies through the shared services and collaborative procurement agenda.

22. However, current LFEPA structures frustrate that aim with a majority of LFEPA members open in their opposition to participating in, or supporting, Mayoral initiatives across the GLA group. The disposal of a high profile LFEPA site illustrates the problem.

23. LFEPA’s former headquarters building is located at 8 Albert Embankment. It has been vacant since LFEPA moved to 169 Union Street in 2008 and efforts to dispose of the site have proved to be problematic, such that LFEPA decided to start the process afresh in March 2014. As a separate but parallel development in the intervening years, the Mayor had procured the London Development Panel (LDP) to assist with GLA group property disposals.

24. Accordingly, the Mayor’s supplementary budget guidance for 2014-15 (issued in September 2013) included the following requirement:

*Functional bodies will need to seek the prior agreement of the Single Property Steering Group for them not to use the London Development Panel for all major land, property and development procurements where the scale is likely to involve a planning application that may be referable to the Mayor.*

25. Given that any development of 8 Albert Embankment would be of a scale that is referable to the Mayor, the site is caught by this requirement. As a result, the GLA would expect LFEPA to follow the Mayor’s budget guidance unless it had agreed from the GLA not to. This is a reasonable GLA expectation and fits with the Mayor’s executive role across the GLA group.

26. Unfortunately, a majority of LFEPA members has refused to comply not only with the Mayor’s budget guidance but also with subsequent requests from the Mayoralty to do so. This is despite the following benefits arising from using the LDP:

- There would be no cost or obligation to LFEPA arising from soft market testing through the LDP;
- Soft market testing through the LDP would assist LFEPA in demonstrating that it is achieving best consideration in its disposal of the site;
- The Mayor procured the LDP so as to speed up the release of public sector land and so it could well be the most advantageous option open to LFEPA in terms of timing; and
- The initial response LFEPA would obtain from the LDP would be useful in assessing the disposal options available to it.

27. Following the refusal of LFEPA to use the LDP, the Mayor is considering directing LFEPA on this matter. However, as events around the Fifth London Safety Plan demonstrated, trying to run LFEPA from City Hall via the Mayoral power of direction is a massively time consuming and costly enterprise. It cannot be an appropriate governance model, even in the short term. The only sustainable approach is to reform LFEPA’s membership.

v. Achieving efficiencies

28. The current membership arrangements stymie efforts to achieve financial savings. During consideration of the Fifth London Safety Plan, and over the course of 18 months, a majority of LFEPA members consistently opposed the London Fire Commissioner’s proposals for realignment of frontline services while refusing to put forward an alternative.

29. The Mayor, while backing the Commissioner’s professional judgment, repeatedly made it clear to LFEPA members and others that he would give serious consideration to any alternative proposals they might have for service realignment. None were forthcoming.

30. London was by no means alone among English fire and rescue services in needing to find significant financial savings from frontline services. Indeed, the reduction in number of firefighters has been markedly higher in other metropolitan areas of England that it has been in London. For example, between 2003 and 2012, the number of firefighters in Greater Manchester reduced by 22 per cent. Over the same period, the number of firefighters in London reduced by one per cent.

31. However, neither the financial imperative nor statistics clearly demonstrating large reductions in the number of fires in the capital prevented a legal challenge to the Fifth London Safety Plan with the open backing of those LFEPA members opposed to the Mayor’s policies.

32. While the Mayor has chosen to protect the LFEPA budget in 2015-16 to allow for a period of stability, there will undoubtedly need to be further financial savings found in the future. Current structures plainly obstruct that necessity rather than enable its achievement.

33. Reform of decision-making will also enable savings to be found in headquarters functions and back office services. This will take a number of forms:

- Through closer working across the GLA group on the Mayor’s shared service and collaborative procurement agenda as a result of LFEPA being brought more under Mayoral control;
- Through savings in central support costs which have been inflated by LFEPA seeking to operate outside of the GLA group and in opposition to the Mayor’s policies; and
- Through a more general slimming down of the LFEPA headquarters function, which greater Mayoral influence would help bring about.

vi. Wider pool of appointees

34. One of the advantages of applying a more flexible approach to LFEPA appointments would be to widen the pool of potential appointees. For example, the Mayor could appoint individuals with experience of emergency planning. Responses to the Mayor of London’s Consultation Exercise

35. The Mayor of London ran a full consultation exercise on his proposals for reform of LFEPA from 5 March to 11 April 2014. The following bodies or individuals were consulted:

- All LFEPA members;
- All London Assembly members;
- All London borough Leaders;
- All London MPs; and
- The London branch of the Fire Brigades Union (FBU).

36. The Mayor received responses from the following:

**LFEPA Members**

- Cllr Peter Truesdale

- James Cleverly AM

- Fiona Twycross AM

- Cllr Maurice Heaster

- David Cartwright

- Cllr Colin Tandy

- Chair of LFEPA Resources Cttee

- Chair of LFEPA

- Labour Group on LFEPA

- LFEPA

- LFEPA

- LFEPA

**London Assembly Members**

- Richard Tracey AM

- Cllr Steve O’Connell AM

- Caroline Pidgeon AM

- Fiona Twycross AM

- Andrew Boff AM

- Darren Johnson AM

- Tony Arbour AM

- Roger Evans AM

- Gareth Bacon AM

- Merton & Wandsworth AM

- Croydon & Sutton AM

- Liberal Democrat Group, London Assembly

- Labour Group, London Assembly

- London Wide AM

- Chair of London Assembly

- South West AM

- Redbridge & Havering AM

- London Wide AM

**London Boroughs**

- Cllr Keith Prince

- Cllr Steven Kelly

- Cllr Nick Botterill

- Cllr Ruth Dombey

- Cllr Maureen O’Hara

- Mayor Lutfur Rahman

- Cllr Ravi Govindia

- Cllr Susan Hall

- Cllr Sarah Hayward

- John O’Brien

- Leader of LB Redbridge

- Leader of LB Havering

- Leader of LB H&F

- Leader of LB Sutton & Leader of Liberal Democrat Group, London Councils

- Cabinet Member for RLB Greenwich

- Mayor of LB Tower Hamlets

- Leader LB Wandsworth

- Leader LB Harrow

- Leader of LB Camden

- Chief Executive of London Councils London MPs Rt Hon Simon Hughes MP MP for Southwark & Bermondsey Barry Gardiner MP MP for Brent North Rt Hon Justine Greening MP MP for Putney Rt Hon Harriet Harman MP MP for Camberwell & Peckham Rt Hon Nick Raynsford MP MP for Greenwich & Woolwich

London Branch of the FBU Paul Embery Regional Secretary, Fire Brigades Union, (London Region)

37. Of the 31 responses received, 15 expressed support for the Mayor’s proposal to request that the Secretary of State invokes the order making power and 13 were opposed. Of the three other responses, one hoped the reforms would provide greater clarity in terms of executive and scrutiny roles and another offered comments on the proposals and asked to be kept informed as they developed.

38. The Mayor and London Councils Executive discussed the proposals at a recent meeting of the London Congress Executive meeting but London Councils have not submitted a formal response, noting instead that there is a broadly held view that the current proposition advanced by the Mayor is not supported but that they would like the Mayor to consider whether London boroughs could develop its own shared proposition with him.

39. Of those in support of the Mayor’s proposals, the majority were from Conservative elected representatives, whilst the majority of those against were from Labour and Liberal Democrat representatives and the FBU.

40. The majority of those in favour of the Mayor’s reform proposals cited the recent issues with approving the Fifth London Safety Plan as an example of an inefficient and unaccountable body. Concerns were also raised over the scrutiny function of London Assembly members, the need for greater clarity of the Mayor’s executive role and fears that LFEPA decision making was too politicised.

41. Comments received included:

- Currently LFEPA is scrutinised by the London Assembly only once a year at a plenary meeting, where a number of Assembly Members who sit on LFEPA question another Assembly Member who sits on LFEPA about the decisions they have all collectively made. This is a parody of scrutiny and a clearer distinction needs to be created between the executive function and the scrutiny function, as was recommended by the CLG Select Committee’s report.

- Whereas the Mayor’s electoral mandate should give him control over the running of the London Fire Brigade the current structure has instead produced an executive more interested in blocking the Mayor than fulfilling their duties to LFEPA. Crucially, in the context of this issue, not a single Member of LFEPA is elected to serve on the Authority and therefore none of them have either an electoral mandate nor electoral accountability for the actions they take whilst serving on it.

- Given the irrefutable fact that calls attended by LFB had reduced by some 40% over 10 years and that the proposed reductions in front line resources were nowhere near demand led, the conclusion that a political agenda was being followed is inescapable. Many agreed that the Mayor of London is the only figure with an electoral mandate for LFEPA and therefore would be appropriate to reform the organisation, in the short term through changes to the composition of LFEPA and in the medium to long term, through primary legislation to create a MOPAC-style model.

As a Member of LFEPA these proposals come as no surprise. In my opinion the current governance arrangements became untenable as soon as the Mayor was forced to use his power of direction last year. As certain members of the Authority were so willing to intentionally obstruct the Commissioner’s plans to balance LFEPA’s budget, without putting forward any alternative proposals, the Mayor was left with no choice but to intervene. Whilst this established the previously untested control the Mayor wields over the Authority the debate surrounding LSP5 also served to demonstrate how the public hold the Mayor accountable for the running of the Brigade.

Currently LFEPA is an anachronism in local government, it rightly has no power to set its own budget, but a significant number of its members seek to use it as a mechanism to further their own political ends by finding any method to frustrate the executive power of the Mayor. This dysfunctional body, split by feuding, results in poor governance value to Londoners and challenges the elected right of the Mayor who clearly should be able to set strategies that support his electoral mandate.

For those who were against the Mayor’s proposals, the general feeling was that the reforms could diminish the democratic accountability of LFEPA, that the current system has worked well and that no change is required.

Comments received included:

- The virtue of the current arrangement is that it provides for a representation of a full range of Londoners’ views on the authority.

- We believe the current arrangements are democratic and well balanced. They are geographically and politically representative with members bringing a wealth of experience to hold officers to account at LFEPA and ensure quality and effective decision-making.

- The current arrangements reflect the close affiliation with the local government family and in particular the representative role that LFEPA has for local authorities in respect of emergency preparedness and response to the Civil Contingencies Act.

- If he (the Mayor) believes that substantive MOPAC style change is necessary let him do it properly through primary legislation where it will receive proper scrutiny in the House of Commons.

- The Mayor should not ask for the composition of LFEPA to be amended. There should be no downgrading of elected representatives, not any increase on the number of Mayoral representatives.

- If the Mayor is intent on a MOPAC style model it would be prudent to establish a body similar to the London Crime Reduction Board – to give local authorities a voice and to ensure that partnership work is scrutinised and held to account. Leaders’ Committee

Pensions Working Group: Item no: 8 Progress report and proposed next steps towards a London LGPS CIV

Report by: Hugh Grover Job title: Director, Fair Funding, Performance and Procurement

Date: 15 July 2014

Contact Officer:

Telephone: 020 7934 9942 Email: hugh.grover@londoncouncils.gov.uk

Summary

Leaders’ Committee, and London Councils’ Executive, have since March 2012, considered and discussed a series of reports focussed on the potential for more collaboration by London local government’s pension funds.

This report follows on from those previous discussions, and provides an update on progress towards establishing a Collective Investment Vehicle (CIV), through which the boroughs will deliver reduced costs and potentially improved returns.

The report:

• Notes the extent of borough engagement, including that 24 boroughs have now given notification to London Councils Chief Executive that they have passed resolutions in support of the recommendations made to the 11 February Leaders’ Committee;

• Provides an update on how thinking has developed around governance and structures, including some early thinking on issues connected to structuring the fund for ‘day-one’, and how oversight and development of the fund platform might be managed over time;

• Gives an overview of stakeholder engagement activity, both delivered and planned, notes that some interest has been shown by the wider LGPS, and describes how investment from other local authority pension funds might be facilitated (if desired by members), and sets out some key next steps for the coming months;

• Briefly discusses the Government’s latest consultation on this topic and asks Leaders’ Committee to consider a draft consultation response and agree it for submission to DCLG.

Recommendations

Leaders’ Committee is asked to:

i) Note the progress update and next steps provided in this report;

ii) Consider and comment on/agree the draft consultation response presented at Annex A Pensions Working Group: Progress report and proposed next steps towards a London LGPS CIV

Introduction

1. In response to a PWG update to its December 2013 meeting, Leaders’ Committee resolved that London Councils should establish a designated fund with contributions from those boroughs interested in further exploration of proposals for the establishment of a London LGPS Collective Investment Vehicle (CIV). To date 28 boroughs have agreed to contribute £25,000 each to the fund (£700,000 in total), another is likely to contribute shortly, and four have decided not to participate at this time. The fund is being used to commission specialist expert professional advice associated with the development of the proposed CIV. At this point £470,000 of the fund has been committed to cover the costs of expert advisors (Eversheds, Deloitte, Northern Trust (on a short contract leading to the February 2014 report to Leaders’ Committee), and Mercer), and the engagement of a Programme Manager on a one year fixed-term contract.

2. At its February 2014 meeting, Leaders’ Committee considered a report from the Pensions Working Group (PWG), which presented a detailed business case and proposals in respect of establishing a CIV with the underlying structure of a UK Authorised Contractual Scheme (ACS).

3. Leaders’ Committee agreed the recommendations of the PWG, and resolved to endorse and recommend to each local authority which decides to participate that, in addition to matters connected to the establishment of an ACS operating company, a representative body, in the form of a new Sectoral Joint Committee (the “Pensions CIV Joint Committee” (PCJC)), be established (pursuant to the existing London Councils Governing Agreement, dated 13 December 2001 (as amended)) for those local authorities that resolve to participate in the arrangements.

4. This report provides an update to Leaders’ Committee on progress since its February meeting, sets out plans for next steps leading towards the eventual launch of the CIV, and asks for consideration to be given to London Councils’ draft response to the Government’s consultation, Local Government Pensions Scheme: Opportunities for collaboration, cost savings and efficiencies, that was published on 2 May. Borough engagement

5. The February 2014 report asked that Leaders’ Committee endorse and recommend to each local authority which decides to participate, that they resolve a number of recommendations necessary to the establishment of the CIV. Since then 24 boroughs have given formal notification (in the form of a letter to the London Councils Chief Executive) that such resolutions have been made, five more are expected to give notification shortly and, as noted above, four have decided that they will not be participating at this time.

Governance and structures

06. The CIV is being developed for and on behalf of the London boroughs, and the boroughs will participate on an entirely voluntary basis. As such, considerable attention has been given to ensuring that the proposed governance and operational structures of the CIV reflects the wishes and needs of the boroughs, both on day one and into the future.

07. It is worth noting that from advice to date the governance and structures described below are considered to give sufficient ownership and control for the participating boroughs such that there is no requirement for a borough to procure either the services of the Operator or entry in the Fund (procurement professionals would recognise the arrangements are “Teckal compliant”).

08. A key element of the governance structures described in the February 2014 report (see Figure 1) was a new Sectoral Joint Committee (the “Pensions CIV Joint Committee”). This committee will act as a representative body, made up of elected members, for those local authorities that resolve to participate in the arrangements. At its March 2014 meeting, Leaders’ Committee agreed, in principle, the Pensions CIV Joint Committee terms of reference. London Councils will shortly approach participating boroughs for nominations to this committee.

09. The CIV will be a Financial Conduct Authority (FCA) regulated UK domiciled Authorised Contractual Scheme (ACS). There are a number of separately regulated elements to the structure, including an ACS Operator and the ACS Fund.

10. The ACS Operator is a limited liability company, which will be wholly owned by the participating boroughs. It will initially have interim directors, as proposed in the February report to Leaders’ Committee, with final directors appointed later, ahead of the Operator becoming operational. Leaders’ Committee will wish to note that one of the proposed interim directors, the Chamberlain of the City of London, has now retired and his successor as Chamberlain will be taking up the role. It is intended that these positions are unremunerated, and it is anticipated that final directors will be appointed to succeed the interim directors by the end of the year.

11. Action is currently in hand to incorporate the company, which includes:

- Each participating borough completing a “shareholder details” form and agreeing model Articles of Association (which will be tailored later to reflect the company’s final operating model);

- Each of the agreed interim directors submitting a “director details” form and agreeing the model Articles of Association.

12. It is anticipated that, initially, the Operator will be based on an outsourced model. As such it will have a limited number of directly employed staff, with most functions being provided through outsourced partners. Over time, it is likely that a number of the outsourced functions could be brought in-house, but this will depend on establishing the necessary level of skills, knowledge and expertise, either through recruitment or training.

13. Procuring the outsourced partners is a complex and time consuming exercise and the Technical Sub-Group (TSG, set up to support the PWG) have begun the process of drawing up specifications and engaging with the market. It is hoped to have the key partners in place by the autumn. Structuring the ACS fund

14. Final decisions about the initial fund structure will be taken later in the year, following consultation with the participating boroughs and the Investment Management industry. However, it is thought that a pragmatic starting point is to analyse which Investment Managers (IM) boroughs are currently invested through, to look for commonality (i.e. more than one borough invested with the same IM in an identical mandate), and to discuss with boroughs and IMs which mandates would be most appropriate to transition to the ACS fund for ‘day-one’. Each mandate would become a separate, ring-fenced, sub-fund within the overall ACS fund.

15. Over time the ACS fund will evolve and develop, with the potential for some mandates to be removed and others to be brought on. The Operator will not be regulated to give investment advice to the boroughs (at least not initially), and so thought is being given to the governance structures that might inform decision making of the boroughs and ensure that the boroughs needs and wishes are reflected in the ACS fund going forward. Figure 2 illustrates current thinking in this area; it shows that an investment committee might be formed, with a number of LGPS experts drawn from across the boroughs, and potentially some independent experts. This committee would meet to consider how the ACS fund is performing and how it might be developed. Those considerations would be informed by input from a panel of procured investment advisors. Reports and recommendations would flow from the investment committee to the PCJC (similar to the way borough officers and investment advisors support borough pension committees). The PCJC would consider the recommendations made by the Investment Committee and feed its recommendations to the Operator. The Operator will act on the recommendations of the PCJC, subject to the necessary due diligence checks and so on, that it will be required to carry out as the regulated body with responsibility for the good management of the ACS fund.

16. This is not an entirely settled structure and its final form will depend on the wishes of the boroughs, the final directors of the ACS Operator being content, and what is acceptable to the FCA from a regulatory perspective.

**Stakeholder engagement**

17. Considerable effort has been put into engaging with the many different stakeholders with an interest in the project. This has included:

- PWG members meeting with the Local Government Minister in September 2013, with another meeting in the planning stages;
- Regular updates and consultation with the Society of London Treasurers and pensions officers across the boroughs, including two focussed briefing sessions allowing for more in-depth discussion and debate;
- Briefing sessions on 9 July 2014 for borough Pension Committee Chairs and members;
- Speaking at a range of conferences and seminars to explain the proposals to both the finance industry and local government;
- Media briefings; and • Discussions with a broad range of Investment Managers and Investment Advisors.

18. Stakeholder engagement will continue to be a major focus for the project going forward.

**Interest from local government pension funds beyond London**

19. A number of LGPS funds outside of London have shown an interest in what the boroughs are seeking to achieve. This has included both, looking at the governance and structures being proposed as a source of learning and information, as well as also asking if the CIV will be open to investors beyond just the London boroughs.

20. On the point of the ACS fund being open to other investors, it is a requirement of the legislation underpinning an ACS fund that it must be open to all qualified investors. Clearly the Operator will need to manage this as it is not the intention that it should take on, for instance, investors from the private sector. However, it could be that the boroughs would be minded to accept investment from other LGPS funds, and this may well be attractive in terms of the benefits to be derived from additional scale.

21. Should boroughs wish to have the ACS fund open to the wider LGPS in the future, there are some issues to be worked through to ensure that this can be achieved without undermining the Teckal compliant nature of the currently proposed structures. For example, Teckal requires that the company (the ACS Operator) derives less than 20 per cent of its turnover (a term still to be defined in detail) from sources beyond its owners (i.e. the shareholding boroughs). The issues around this are being considered by the PWG and its TSG in order that nothing is set in stone that might limit options and opportunities later.

**Next steps**

22. There are a number of complex dependencies that impact on the detailed project plan, and some of these have yet to be resolved. However, it remains the intention that the ACS fund will be established and operational in the spring of 2015.

23. Key next steps include:

• Now

o Incorporate the Operator as quickly as possible;

o Commence the procurement of outsourced partners (legal advice is that the Operator will be required to follow EU procurement rules); • By the end of autumn 2014: o Finalise contracts with key outsourced partners; o Finalise issues connected to the wider LGPS; o Settle decisions connected to the ACS fund structure for launch; o Seek decisions from participating boroughs about the expected extent of investment into the ACS fund at launch; o Recruit (final) directors for the Operator to replace the interim directors that are being appointed now – this is likely to require the engagement of a specialist recruitment consultant; o Engage staff in the Operator, and settle an SLA with London Councils

• Before Christmas: o Approach the FCA for authorisation of the Operator and ACS fund;

**Government Consultation**

24. On 2 May the Government released a consultation titled *Local Government Pensions Scheme: Opportunities for collaboration, cost savings and efficiencies*. The consultation draws on three sources of evidence:

• A call for evidence on the future structure of the LGPS, which ran through the summer of last year;

• Analysis of responses to the call for evidence; and

• Supplementary cost-benefit analysis of proposals for reform that the Government commissioned from Hymans Robertson LLP.

25. The package of proposals set out in consultation include:

• Establishing common investment vehicles to provide funds with a mechanism to access economies of scale, helping them to invest more efficiently in listed and alternative assets and to reduce investment costs;

• Significantly reducing investment fees and other costs of investment by using passive management for listed assets, since the aggregate fund performance has been shown to replicate the market; • Keeping asset allocation with the local fund authorities, and making available more transparent and comparable data to help identify the true cost of investment and drive further efficiencies in the Scheme;

• A proposal not to pursue fund mergers at this time.

26. The Government poses five questions in the consultation, which are:

Q1. Do you agree that common investment vehicles would allow funds to achieve economies of scale and deliver savings for listed and alternative investments? Please explain and evidence your view.

Q2. Do you agree with the proposal to keep decisions about asset allocation with the local fund authorities?

Q3. How many common investment vehicles should be established and which asset classes do you think should be separately represented in each of the listed asset and alternative asset common investment vehicles?

Q4. What type of common investment vehicle do you believe would offer the most beneficial structure? What governance arrangements should be established?

Q5. In light of the evidence on the relative costs and benefits of active and passive management, including Hymans Robertson's evidence on aggregate performance, which of the options set out above offers best value for taxpayers, Scheme members and employers?

27. The closing date for the consultation was 11 July, but the Government has agreed to extend this to 18 July for London Councils. The extension was requested in light of the closeness of this meeting and the desirability of seeking Leaders’ Committee consideration of the draft ahead of its submission.

28. The draft response attached at Annex A has been written with input from a number of pensions experts from across the boroughs. In summary it says:

• London Councils endorses the Government’s decision not to pursue fund mergers at this time.

• London Councils believes that Collective Investment Vehicles (CIVs) can offer significant savings and the opportunity for improved investment returns through economies of scale and access to alternative investments. • London Councils strongly endorses the proposal to keep asset allocation decisions with the local fund authorities.

• London Councils has no firm view on the number of CIVs that should be set up, but does believe that a single CIV for the entire LGPS would generate dis-economies of scale and potential disruption to the investment market.

• London Councils believes that an FCA regulated ACS is the most suitable form of CIV for the London boroughs, and proposes a governance structure that allows the boroughs strong oversight and control within the regulatory framework.

• London Councils believes that passive management should not be enforced at any level and that individual fund authorities should have the ability to use active management as part of their investment strategies. London Councils also believes that the London CIV could enhance governance and could act as a catalyst to deliver the benefits of active management for individual pension funds.

29. Leaders’ Committee are asked to consider and comment on/agree the draft response ahead of its submission to Government. If Leaders’ Committee require further drafting changes, it is proposed that the Chair will agree the final draft before submission to Government.

30. London Councils’ officers have continued to engage closely with their counterparts in Government and, while ultimate decisions are still to be made by Ministers, there has been no indication that the Government thinks the boroughs should stop their plans to establish a CIV. Indeed, the fact that the Government’s consultation clearly shows that Ministers have developed their thinking away from LGPS fund mergers, towards encouraging the development of CIVs, and that the Local Government Minister has asked for a further meeting with the PWG, could both be taken as positive signs of encouragement.

Recommendations

31. Leaders’ Committee is asked to:

i) Note the progress update and next steps provided in this report;

ii) Consider and comment on/agree the draft consultation response presented at Annex A Legal implications

32. Leaders’ Committee has considered legal issues relating to participation in a joint committee and establishment of a company to be an ACS Operator. Leaders’ Committee has identified that these actions would be within the powers of the London local authorities. It has also identified the need for each local authority that decides to participate in these arrangements to exercise its powers reasonably and to ensure that it has a decision to enter into the arrangements from a body with the authority to do so. Leaders’ Committee needs to be satisfied that the London boroughs that have decided to contribute to the fund and to participate in the arrangements have taken valid decisions. This report explains how the London local authorities can establish a governance structure for joint working and form a company to act as the ACS Operator in compliance with all relevant legal obligations.

Financial implications

33. The Director of Corporate Resources reports that costs of £470,000 to date committed in establishing a Collective Investment Vehicle can be contained within the sum of £700,000 received from 29 contributing boroughs. Work will commence over the summer to engage staff in the Operator and to establish an agreement to accommodate and provide a full range of office and support services to these staff within London Councils.

Equalities implications

34. There are no equalities implications for London Councils

Attachments

Annex A: Draft consultation response

Background papers

13 March 2012, Leaders’ Committee report: http://www.londoncouncils.gov.uk/committees/agenda.htm?pk_agenda_items=4796

13 November 2012, Leaders’ Committee report: http://www.londoncouncils.gov.uk/committees/agenda.htm?pk_agenda_items=5072

11 December 2012, Leaders’ Committee report: http://www.londoncouncils.gov.uk/committees/agenda.htm?pk_agenda_items=5109

14 May 2013, Leaders’ Committee report: http://www.londoncouncils.gov.uk/committees/agenda.htm?pk_agenda_items=5252

19 September 2013, Executive report: http://www.londoncouncils.gov.uk/committees/agenda.htm?pk_agenda_items=5353

26 November 2013, Executive report: http://www.londoncouncils.gov.uk/committees/agenda.htm?pk_agenda_items=5490

10 December 2013, Leaders’ Committee report http://www.londoncouncils.gov.uk/committees/agenda.htm?pk_agenda_items=5495

11 February 2014, Leaders’ Committee report http://www.londoncouncils.gov.uk/committees/agenda.htm?pk_agenda_items=5562

11 March 2014, Leaders’ Committee report http://www.londoncouncils.gov.uk/committees/agenda.htm?pk_agenda_items=5598 London Government Pension Scheme: Opportunities for collaboration, cost savings and efficiencies

Response by London Councils

London Councils represents all 32 London boroughs and the City of London. It is a cross-party organisation that works on behalf of all of its member authorities regardless of political persuasion. We develop policy, lobby government and others, and run a range of services designed to make life better for Londoners.

Introduction

1. London Councils supports many of the proposals in the Government’s consultation document Local Government Pension Scheme: Opportunities for collaboration, cost savings and efficiencies, particularly its recognition of the progress made by the London boroughs, facilitated by London Councils, towards establishing a Collective Investment Vehicle (CIV) to deliver greater collaboration across the capital’s local government pension funds. London Councils particularly endorses the government’s decision to focus on the establishment of CIVs rather than pursuing expensive and time consuming fund mergers.

2. The London boroughs have been actively engaged in working towards establishing the CIV since the early summer of 2013, and evidence gleaned from the process until now has been included in this response.

3. The 33 individual funds (one for each of the 32 London boroughs and one for the City of London Corporation) provide pensions services for their own local authority employees and a number of ‘admitted bodies’, mainly schools and colleges. Each fund is autonomous and overseen by a committee of locally elected councillors, and accordingly London Councils strongly endorses the Government’s recognition of the importance of local democratic accountability and local decision making.

Q1. Do you agree that Common Investment Vehicles would allow funds to achieve economies of scale and deliver savings for listed and alternative investments?

4. London’s local authorities currently have over £24 billion of assets under management. London Councils’ analysis shows that in 2012-13 approximately £72.8 million was paid in fees across 253 fund mandates from 87 fund managers. A report written by PwC on behalf of London Councils and submitted to London Councils’ Leader’s Committee on 13th November 2012¹, estimated savings in the region of £120 million per annum from the creation of a CIV for the London boroughs, based on near full participation. These benefits arose from reduced investment management fees, improved performance, and enhanced efficiency. At that time, the costs of running the CIV were estimated to be £4.8 million, again based on full participation. At lower levels of participation, both the financial benefits and the costs would inevitably reduce.

¹ London Councils Leaders Committee, 13 November 2012, Item 6 – London Pensions Mutual: further advice http://www.londoncouncils.gov.uk/committees/agenda.htm?pk_agenda_items=5072 5. More detailed analysis of potential costs and benefits, based on prudent high level assumptions, are summarised in the table below. Savings and costs of the CIV have been analysed for assets under management of £24 billion, £10 billion and £5 billion. It is considered that a reasonable minimum target size of assets under management in the early stages would be around £5 billion. This is based on analysis of existing investments held by London funds and also takes into account that, initially, the majority of investment mandates taken onto the CIV are likely to be passive mandates. It is clear that, based on the expected savings previously identified, forecast costs will be comfortably covered by savings in reduced management fees.

| Assets Under Management | £000's | Assets Under Management | £000's | Assets Under Management | £000's | |-------------------------|--------|-------------------------|--------|-------------------------|--------| | £24bn | | £10bn | | £5bn | | | Expected savings per annum | 120,000 | 50,000 | 25,000 | | On-going costs per annum | 6,100 | 3,650 | 2,750 | | Establishment Costs | 1,700 | 1,500 | 1,400 |

6. Early engagement with the Investment Management community has shown that the economies of scale achieved with a CIV will facilitate immediate savings through reduced fees based upon the aggregation of investments. In addition, the potential scale of the CIV opens up the possibility of investment opportunities not available to the average LGPS fund (such as alternative investments, where cost of entry is often prohibitively high) and just as importantly, reduces the need to use Fund of Funds.

7. This analysis aligns with Hymans Robertson’s analysis of nationwide savings, albeit on a proportional scale. It also demonstrates the possible success of a ‘local’ CIV strategy that could allow a number of CIVs to be set up in different areas of the country, rather than a single large entity. However, it has been noted that the Local Government Pension Scheme funds in London are unique within the UK due not only to their structural similarity and geographical proximity, but also their ability to work collaboratively both as small groupings of boroughs and on a pan-London basis through the facilitation of London Councils.

Q2. Do you agree with the proposal to keep decisions about asset allocation with the local fund authorities?

08. London Councils strongly endorses this proposal.

09. As noted in the government report, one of the two themes mentioned ‘consistently’ by respondents to the Government’s call for evidence, was the importance of local accountability. Any attempt to deny local pension fund authorities decision making powers would significantly undermine local accountability; it is London Councils’ view that it is vital to keep the current arrangements that provide democratic accountability and oversight by members. Elected members are very conscious that poor fund performance and any resulting increase in employer costs, would add even further pressure to already overstretched council budgets, with the potential to cause service cuts and/or council tax increases. London’s local authorities are directly accountable to their own electorates for the efficient and effective delivery of their pension fund responsibilities. They do this by ensuring maximum return from their investments within an acceptable risk framework, reflecting each authority’s unique combination of solvency, cash flow requirements, and deficit recovery period.

10. Splitting decision making, through the involvement of bodies outside of the authority itself, could expose schemes to risks for which no party will be properly accountable. For example, asset allocation decisions made by a central body and applied uniformly to a number of different LGPS funds, will almost inevitably lead to some funds underperforming, with the resultant budget pressures falling on the authority rather than the decision making body. Different funds require different investment approaches and the most sensible way of ensuring that these different approaches can continue to be delivered, is by leaving asset allocation firmly in the hands of the local fund authorities.

11. London Councils also believes that the proposed structure of the London CIV, whereby the individual boroughs have involvement in decisions about which Investment Managers and asset classes are brought onto the platform (shown in the diagram below) could act as a catalyst to enhanced governance, while at the same time giving the boroughs the ability to invest in such a way as suits their particular needs and investment strategies.

12. However, the structures being adopted in London do not represent the only alternatives, and it is important to recognise that a ‘one size fits all’ approach across all LGPS funds is unlikely to be suitable or practical. Q3. How many common investment vehicles should be established and which asset classes do you think should be separately represented in each of the listed asset and alternative asset common investment vehicles?

13. London Councils does not have a firm view about the ideal number of CIVs that should be established. However, it is likely to be the case that one CIV for the whole of the LGPS would generate dis-economies of scale and could potentially be disruptive to the investment market. Even with passive management, depending upon the index chosen and the rules it follows, a single CIV might well become a target for hedge funds that are aware of the CIV’s need to rebalance in accordance with the known index rules.

14. London Councils is strongly of the view that there is no logical reason to split asset classes across different CIVs. The structure being established for the London CIV will deliver a platform suitable for all asset classes, and bringing them together in one vehicle delivers both efficiency and the ability to switch swiftly from one asset class to another as individual authorities adjust their investment strategies.

Q4. What type of common investment vehicle do you believe would offer the most beneficial structure? What governance arrangements should be established?

15. It is the view of London Councils that the most appropriate underlying structure for the London CIV is a UK domiciled, FCA regulated, Authorised Contractual Scheme (ACS.) This structure would not only allow the Boroughs to benefit from the tax efficiency of the scheme, but would also allow them to maintain the withholding tax benefits the pension funds are currently entitled to. There are also added benefits of improved transparency and the collation of comparative data, stemming from the participation in an ACS. The performance of different sub-funds (mandates) within the ACS, will be completely transparent and visible to all participating boroughs, and will be measureable against each other to improve both investment returns and accountability for different borough pension schemes.

16. As already noted, this is not to suggest that an ACS is the most suitable structure for every fund across the entire LGPS. Again the point of London’s uniqueness should be noted; the goals of the members of any CIV should be examined and then translated into the most suitable structure.

17. The proposed structure of the London Boroughs ACS provides a possible model for other LGPS CIVs that may be looking to achieve similar goals; in this case it has been designed to allow boroughs to have strong oversight and ownership of the ACS Operator. This oversight and ownership is achieved at a number of levels, as illustrated in the diagram above and described below:

a) The boroughs will each be shareholders in the ACS Operator, and will be able to exert influence over the ACS Operator’s board and activities through their shareholdings;

b) The ‘Pensions CIV Joint Committee’ will be made up of elected Councillors nominated by their boroughs. This Joint Committee will have a dual role, first as a platform for shareholder decision making (e.g. appointing directors to the ACS Operator’s board), and second as a forum for the participating boroughs to take advice on, and consider issues relating to the ACS Fund (e.g. fund performance and structure); c) Subject to regulatory requirements, the board of directors of the ACS Operator is likely to include some representation of the shareholders (expected to be appointed from the elected Councillors who will sit on the Pensions CIV Joint Committee and who will represent all participating local authorities’ interests);

d) The ACS operator will require staff (on a part-time basis) to assist in activities including investment manager selection and it is proposed that as many of these roles as possible may be undertaken by existing officers of the boroughs with relevant experience; and

e) Information relating to the performance of investments and the ACS Operator will be made available on a regular basis to boroughs investing and the Pensions CIV Joint Committee representing the boroughs’ shareholding interest in the Operator.

18. The emphasis in this case is upon local accountability and transparency. The governance model depicted above provides both the oversight required by the boroughs and the fundamental collectivisation required to make significant savings, this is underpinned by a set of principles agreed by London Councils’ Leaders’ Committee, which are:

- Investment in the ACS should be voluntary. A borough should be able to decide it does not wish to participate, or to the extent it initially decided to participate, to choose to withdraw its investment.
- If a borough chose to invest, it will be able to choose which asset classes to invest into, and how much it might invest into each asset class.
- The boroughs should have sufficient control over the ACS Operator, in order to be assured that it will be acting in their best interests.
- The ACS Operator would provide regular information to participating boroughs regarding the performance of managers, investment options, and other areas, so that information continues to be available to the same extent it is currently in order for boroughs to make investment decisions.
- Authorities seeking to invest in the ACS will also take a shareholding interest in the Operator (and have membership of the Pensions CIV Joint Committee).
- The ACS will not increase the overall investment risk faced by boroughs.

Q5. In light of the evidence on the relative costs and benefits of active and passive management, including Hymans Robertson’s evidence on aggregate performance, which of the options set out below offers best value for taxpayers, Scheme members and employers?

i) Funds required to move all listed assets into passive management.

ii) Funds required to invest certain percentage of listed assets passively.

iii) Funds required to invest listed assets passively on comply or explain basis.

iv) Funds expected to consider benefits of passively investing listed assets. 19. London Councils does not support any of the proposed options. As recognised in the consultation, active management has provided many LGPS funds the opportunity to outperform the market; administering authorities should not be constrained by limitations placed on the use of active strategies by ministers.

20. One of the benefits that is expected to flow from establishing the London CIV is delivery of enhanced governance and a platform through which all the London boroughs will be able to benefit from the outperformance that best in class active management can deliver. London Councils firmly believes that the CIV should be allowed complete freedom to deliver the full range of investment choices for the boroughs to choose from.

21. Analysis undertaken by the Society of London Treasurers clearly demonstrates the potential benefits of active management strategies. Their analysis found that, in the 2013/13 financial year, London funds (in aggregate) would have delivered £49.4 million better performance had they invested passively, but a number of funds would have delivered lower performance than they actually did. However, if only those funds achieving returns lower than the passive benchmark were able to achieve passive returns and those that achieved outperformance were able to keep those excess returns, then (in aggregate) the London funds would have delivered £101.3 million better performance. This clearly demonstrates that addressing underperformance (as might be achieved through the London CIV), while retaining outperformance produces the best overall return for taxpayers.

22. It does not seem appropriate to enforce the extent to which LGPS funds should move to passive investment, any such compulsion by Government would effectively take strategic investment decisions out of the hands of LGPS funds and one must assume that, at that point, the Government would take responsibility for the future performance of all funds.

23. The structure of a CIV lends itself to the sharing of best governance procedures and practices, and could arguably act as a catalyst to active management's benefits to individual pension funds. With a dialogue between separate Pension Schemes becoming more readily available through the CIV, it will facilitate the comparison of different fund manager's performance, thereby ‘encouraging’ active managers to out-perform their benchmark or suffer the consequences that a competitive market invariably deals out.

24. Nonetheless, if compelled to express a preference for one of the four options presented in the consultation, London Councils would select option iii), but only after the Government has clearly set out the detail of how a “comply or explain” regime would be monitored and enforced.

London Councils

July 2014 Leaders’ Committee

Summaries of Minutes

Item no: 9

Report by: Derek Gadd\
Job title: Head of Governance

Date: 15 July 2014

Contact Officer: Derek Gadd

Telephone: 020 7934 9505\
Email: Derek.gadd@londoncouncils.gov.uk

Summary

Summaries of the minutes of London Councils’ Capital Ambition Board, Transport & Environment Committee, Audit Committee, Grants Committee and Greater London Provincial Council meetings.

Recommendations

Leader’s Committee is recommended to note the attached summaries:

- Capital Ambition board meeting held on 6 March 2014
- Transport and Environment committee meeting held on 13 March 2014
- Audit committee meeting held on 20 March 2014
- Grants Committee meeting held on 26 March 2014
- Greater London Provincial Council meeting held on 31 March 2014 Leaders’ Committee

Report from the Capital Ambition Board Item no: meeting – 6 March 2014

Report by: Ana Gradiska Job title: Principal Governance and Projects Officer

Date: 15 July 2014

Contact Officer: Ana Gradiska

Telephone: 020 7934 9781 Email: Ana.gradiska@londoncouncils.gov.uk

Summary: Summary of the minutes of the Capital Ambition Board meeting held on 6 March 2014

Recommendations: For information.

Attendance: Members Edward Lord OBE (City of London, Chair), Cllr Stephen Alambritis (LB Merton, Cllr Ruth Cadbury (LB Hounslow), Cllr Keith Prince (LB Redbridge), Advisors Rob Leak (Chief Executive, LB Enfield), Mike O’Donnell (Chair, London Procurement Board), London Councils Nick Lester (Corporate Director, Services), Frank Smith (Director of Corporate Resources), Mary Vine-Morris (Director, Capital Ambition), Ana Gradiska (Principal Governance and Projects Officer) London Ventures Victoria Evans (Manager, EY), Matt Huxley (Senior Manager, EY) Presentation: Mike O’Donnell, Director of Finance (LB Camden) Terry Brewer, Divisional Director Commercial, Contracts and Procurement (LB Harrow).

Members welcomed Mehboob Khan, the new Labour Party Political Adviser at London Councils.

1. Declarations of Interest

1.1 There were no declarations of interest.

2. Apologies for absence

2.1 Apologies were received from Cllr David Simmonds (LB Hillingdon), Martin Smith (LB Ealing) and Jane West (LB Hammersmith and Fulham).

3. Minutes of the meeting held on 10 February 2014

3.1 The minutes were agreed as an accurate record of the CAB meeting on 10 February 2014. 4. Director’s report

4.1 The Corporate Director, Services, said that almost all of the 32 current Capital Ambition Projects (shown in Appendix B) had now closed. Regular benefits reporting and case studies have indicated that many activities have been mainstreamed by boroughs to ensure achievement of forecast benefits. With these indications of success and conversely, faced with issues of capacity for an on-going burden of monitoring and reporting by boroughs individually, he proposed that detailed monitoring of Capital Ambition project benefits should now end.

4.2 Members noted the report.

5. Benefits Case Study London Procurement Strategy: Category Management (CA524)

5.1 In October 2011, the Capital Ambition Board awarded £150k revenue funding for the implementation of the London Procurement Strategy. The project sought to resource the procurement and development of the London category management strategies and implementation plans under the management of the London Procurement Strategy Board. Potential savings from the delivery of the London Procurement Strategy were estimated at 40% of the £8.9bn third-party spend across London. It was anticipated that the savings would follow the implementation of the category strategies for which the funding was allocated.

5.2 The presenters, Mike O’Donnell, Director of Finance (LB Camden) and Terry Brewer, Divisional Director Commercial, Contracts and Procurement (LB Harrow), gave a presentation on the successes of their project.

5.3 Members congratulated the presenters on the success of the project and said they were interested in taking this project further.

DECISION: Members agreed to support this project going forward. London Councils officers will work with the project managers on progressing this project and will bring the proposals back to the CA Board meeting in July.

6. London Ventures’ Marketing and Communications Plan

6.1 Victoria Evans from EY outlined the intended marketing and communication activities for London Ventures in the period to the next CA Board meeting in July 2014. She said that EY and London Councils’ officers have developed a joint strategy with Chief Executives for promoting the programme to executive and senior officers.

6.3 Members agreed the marketing and communications plan in Appendix A.

7. Any other business

7.1 There was no other business. The Chair wished all members luck for the local elections taking place on 22 May 2014. Leaders’ Committee

Report from the Transport & Environment Committee – 13 March 2014

Report by: Alan Edwards\
Job title: Governance Manager

Date: 15 July 2014

Contact Officer: Alan Edwards

Telephone: 020 7934 9911\
Email: Alan.e@londoncouncils.gov.uk

Summary: Summary of the minutes of the London Councils’ Transport & Environment Committee held on 13 March 2014

Recommendations: For information.

1. Attendance: Cllr Dean Cohen (LB Barnet), Cllr Gareth Bacon (LB Bexley), Cllr Colin Smith (LB Bromley), Cllr Mike Fisher (LB Croydon), Cllr Bassam Mahfouz (LB Ealing), Cllr Chris Bond (LB Enfield), Cllr Harpinder Singh (RB Greenwich), Cllr Feryal Demirci (LB Hackney), Cllr John Nickolay (LB Harrow – Deputy), Cllr Catherine West (LB Islington – Chair), Cllr Bob Steed (RB Kingston-upon-Thames - Deputy), Cllr Alan Smith (LB Lewisham), Cllr Ian Corbett (LB Newham), Cllr Shoaib Patel (LB Redbridge), Cllr Chris Harrison (LB Richmond-upon-Thames), Cllr Barrie Hargrove (LB Southwark), Cllr Colin Hall (LB Sutton), Cllr Clyde Loakes (LB Waltham Forest), Cllr Russell King (LB Wandsworth) and Michele Dix (Transport for London).

2. Apologies for Absence: Cllr Herbert Collins (LB Barking & Dagenham), Cllr Susan Hall (LB Harrow), Cllr Colin Ellar (LB Hounslow), Cllr Simon James (RB Kingston-upon-Thames) and Michael Welbank (City of London)

3. Chair’s Report The Committee considered and noted a report that updated members on London Councils’ work on transport and environment policy since the last TEC meeting on 13 December 2013 and provided a forward look until the next TEC meeting on 17 July 2014.

4. Transport for London – Current Transport Issues (verbal update) The Committee received a verbal update from Michele Dix (TfL) on current transport issues. The Committee agreed that Michele Dix would go back to TfL and get a definitive answer regarding the removal of the gyratory on Stoke Newington Road in Hackney and notify Councillor Demirci of the outcome.

5. London Area Road Network The Committee received a report that informed members on how the road network was working in London, with particular regard to how effective the borough relationships with Network Rail and the Train Operation Companies (TOCs) were, as part of the TEC Business Plan for 2013/14.

The Committee: (i) noted that boroughs should talk to their officers about what issues were coming up in their areas with regards to the rail network, (ii) agreed to bring report back to the TEC Executive Sub Committee in September 2014, (iii) agreed that boroughs required further research to be carried out on the future development of the rail network as part of the business plan for 2014/15, and (iv) agreed that officers should work with Network Rail and/or Train Operating Companies to evaluate the scope for further partnership working.

6. Road Safety Action Plan The Committee received a report that updated members on the latest developments of the Road Safety Action Plan, including the publication of the following: Motorcycle Action Plan, Pedestrian Action Plan and the Cycling Safety Action plan.

The Committee: (i) noted the progress made since the publication of the Road Safety Action Plan in June 2013, (ii) noted the central role that could continue to be played by the boroughs in delivering actions to reduce casualties in London through the implementation of the Road Safety Action Plan, (iii) confirmed that boroughs were content for London Councils and borough officers to continue to develop the Motorcycle Safety Action Plan, Pedestrian Safety Action Plan and Cycling Action Plan alongside TfL and other stakeholders, and (iv) noted that LB Bromley would not be bound to any areas that it could not agree to (especially with regards to the implementation of 20 mph zones).

7. Update on Freedom Pass Projects The Committee received a report that provided members with an update on the following: mid-term review of continued eligibility for Freedom Pass, streamlining of the application process using 60+ data, charging for replacement passes and plans for the 2015 re-issue.

The Committee: (i) noted the progress on the Freedom Pass mid-term review of eligibility and the National Fraud Initiative, (ii) noted the progress on the transfer of 60+ data from TfL, (iii) noted the update on charging for replacement passes, (iv) agreed to change the Freedom Pass helpline number from an 0845 to an 03 number, and (v) agreed to continue to send wallets to Freedom Pass holders with their replacement passes in the 2015 reissue.

8. Safer Lorry Scheme The Committee received a report that set out proposals to create and promote a new Londonwide Safer Lorry Scheme that would require the fitting of additional safety mirrors and side guards to all Heavy Goods Vehicles (HGVs) over 3.5 tonnes, at all times.

The Committee: (i) agreed to the principal of creating a new pan-London traffic order requiring minimum safety features for all HGVs over 3.5 tonnes, and (ii) agreed to recommend that the London local authorities and TfL agree to amend the TEC Agreement to allow the making and enforcement of pan-London traffic orders.

9. London Lorry Control Scheme Consultation – Next Steps The Committee received a report that provided an update on the consultation on the amendment of the London Lorry Control Scheme permit conditions to require the fitting of side guards and additional safety mirrors.

The Committee noted the progress of the consultation and agreed that a further report on outcome of the London Lorry Control consultation would be presented to members at the TEC AGM in July 2014. A final decision would be made once members had received this report.

10. Response to TfL’s Proposal to end Capital Call The Committee received a report that informed members of TfL’s proposal to end the Capital Call scheme from April 2015 and recommended that London Councils’ officers discussed with TfL how funding saved could be used to improve the Taxicard Scheme.

The Committee: (i) agreed to “soften-up” the wording in paragraph 10 of the report (ie to delete the word “end” before “Capital Call”), Spencer Palmer to run a draft of the new wording by Councillor West, (ii) agreed that Councillor West would write a letter to TfL stating that the underspend from the cessation of Capital Call should be diverted to the borough Taxicard scheme, and (iii) agreed that London Councils should officers enter into discussions with TfL regarding the diversion of the savings from the Capital Call. scheme to improve the Taxicard service in those boroughs where performance needs to improve to the level of the highest performing boroughs.

11. **London European Partnership for Transport (LEPT) – EU Funding & Bidding Update**

The Committee received a report on the LEPT briefing, brokering and bidding activities to maximise the EU funding opportunities for boroughs in 2014. Five EU funding bids involving boroughs had been initiated by LEPT in January 2014.

The Committee: (i) noted the on-going EU bidding activities of Boroughs, initiated and supported by LEPT, (ii) noted LEPT’s coordination of the OPTI-MOVE proposal on behalf of Boroughs, (iii) noted future EU funding opportunities for Boroughs in 2014, and (iv) agreed that Nick Lester would ask a member of the LEPT team to contact Cllr Hall regarding borough involvement in the bids.

12. **Re-appointment of Parking & Traffic Adjudicators**

The Committee considered a report that proposed the re-appointment of parking and traffic adjudicators.

The Committee agreed to appoint the following adjudicators for a period of 5 years from the 11 June 2014: Jane Anderson, Anthony Chan, Mark Eldridge, Andrew Harman, Angela Black, John Lane Michael Lawrence and Kevin More.

It was agreed that the following adjudicators be appointed until their respective 70th birthdays:

- Anthony Edie to be appointed from 11th June 2014 to 13th November 2016
- Michael Nathan to be appointed from 11th June 2014 to 19th September 2015

The Committee also agreed that the following adjudicators be re-appointed from 1st July 2014, for a period of 5 years:

- Teresa Brennan
- Michael Burke
- Anju Kaler
- Alastair McFarlane
- Austin Wilkinson

The above re-appointments would need to be approved by the Lord Chancellor.

It was also recommended that Mr Keith Hotton would not be re-appointed as an adjudicator, subject to approval by the Lord Chancellor, and the Lord Chief Justice (Regulation 17(3)(b) of The Civil Enforcement of Parking Contraventions (England) General Regulations 2007).

13. **Dates of the TEC & TEC Executive Sub Committee for 2014/15**

The Committee noted and agreed the dates of the TEC and TEC Executive Sub Committee for the year 2014/15, subject to confirmation at the TEC Annual General Meeting on 17 July 2014.

14. **Minutes of the TEC Executive Sub Committee held on 13 February 2014**

The minutes of the TEC Executive Sub Committee meeting held on 13 February 2014 were noted.

15. **Minutes of the TEC Main Meeting held on 12 December 2013**

*Item 4: “Walking in London” (Q & A, 2nd paragraph) – Cllr Smith asked if a breakdown of the costs of the “Step Out in London” project against outcomes achieved could be brought to the next TEC meeting, as requested in the minutes of 12 December 2013.*

Subject to the above action being implemented, the minutes of the TEC Main meeting held on 12 December 2013 were agreed as an accurate record.

16. **Any Other Business**

Councillors Hall, Fisher, Loakes and Michele Dix thanked Councillor West for chairing the TEC meetings over the past four years. Councillor West thanked the London Councils’ officers for supporting the Committee. She said that there was a good team present to support TEC going forward. Minutes of the Meeting of the Audit Committee 20 March 2014

Cllr Ian Bond was in the Chair

Members Present: Cllr Ian Bond (LB Redbridge) Cllr Stephen Alambritis (LB Merton) Mr Roger Chadwick (City of London)

In Attendance: Myles Binney, Auditor, City of London Nirupa Gardner, Auditor, City of London Paul Nagle, Head of Audit & Risk Management, City of London Ciaran McLaughlin, Auditor for London Councils, PricewaterhouseCoopers

London Councils’ officers were in attendance.

1. Declarations of Interest

There were no declarations of interest.

Introductions were made.

2. Apologies for Absence

An apology for absence was received from Councillor Lib Peck (LB Lambeth)

3. Minutes of the Audit Committee meeting held on 26 September 2013

The minutes of the Audit Committee meeting held on 26 September 2013 were agreed as being an accurate record.

4. Internal Audit Plan 2014/15

The Audit Committee received a report that informed members of the draft internal audit plan for 2014/15, as proposed by the City of London’s Internal Audit section under the terms of the service level agreement for financial and payroll services. The report also provided details on the delivery of the 2013/14 plan and the proposed rolling five-year programme covering the period up to 2018/19.

Davis Sanni said that the internal audit plan had been developed in liaison with the London Councils’ Corporate Management Board (CMB) and also involved the review of London Councils’ Risk Register and the planned work of PwC, the external auditors. Paul Nagle (Head of Audit and Risk Management, City of London) said that the plan was carried out on a cyclical 5-year basis and gave assurances on London Councils’ control environment. He said the proposed number of hours allocated to audits in 2014/15 had been slightly reduced in comparison to previous years due to the extensive work carried out on ICT audits in the current financial year. A total of 38 days have been allocated for audits in 2014/15 which include four days for follow-up reviews (eg for Grants & ICT). Councillor Alambritis said that he was very pleased with the internal audit plan for 2014/15.

The Audit Committee:

- Approved the internal audit programme for 2014/15, as proposed by the City of London and detailed in Appendix A of the report
- Noted the delivery of the 2013/14 internal audit plan, and
- Approved the 5-year internal audit plan for 2014/15 to 2018/19, as proposed by the City of London and detailed in Appendix B of the report.

5. External Audit Plan 2013/14

The Audit Committee received a report on the scope of the external audit for London Councils, in respect of the 2013/14 financial accounts, as detailed in the draft external audit plan.

Ciaran McLaughlin (PricewaterhouseCoopers – PwC) went through the external audit plan with members. He made the following comments:

- Page 19 of the report outlined PwC’s responsibilities
- Any significant or elevated risks were highlighted on pages 21 to 22 (the risks identified could be found on the right-hand side)
- The overall materiality is £1.364 million (2% of reported gross expenditure for 2012/13), with the de minimis reporting level being £68,000, both of which needed to be agreed by the Audit Committee (page 23)
- Pages 26 to 27 outlined the risks of fraud, with page 26 stating PwC’s responsibility. The Audit Committee should let PwC know of any specific areas of fraud it was aware of
- The PwC audit team details could be found on page 28 (PwC had recently lost the Engagement Manager who has led the past two audits)
- The audit fees for London Councils were on page 29, along with the fee for the AR27 return
- The independent threats and safeguards could be found in Appendix A, page 31 (PwC was found to be independent)
- The “Communications Plan” was on page 32, along with some recent PwC publications on page 33
- Appendix D (pages 34 to 35) outline the features of the quality of PwC’s audit

Ciaran McLaughlin said the fee for London Councils’ audit had reduced year-on-year in real terms and efficiencies continued to be looked at. PwC propose to use their “Client Connect” system which is an online portal for clients to upload required audit information. The portal is located in Germany. They also intend to use a service delivery centre, to document work, based in Poland. PwC, however, remain responsible for the whole of London Councils’ audit and the security of the data. Ciaran McLaughlin confirmed that the Audit Commission was satisfied with the arrangements that had been put in place.

The Chair said that he welcomed the fact that the PwC audit fee had not increased. Roger Chadwick said that he hoped that the quality of the audit would not be compromised as a result of the unchanged audit fee. He also asked whether a “declarations of interest” system for senior officers is in place at London Councils to help prevent fraud. Paul Nagle confirmed that a declaration of interest procedure was in place at the City of London from Director level to key audit posts. He said that he was uncertain what systems London Councils had in place regarding this matter. Frank Smith confirmed that London Councils’ Directors had to declare their interests as related party transactions on an annual basis, although this did not go as far as the City of London’s current procedures. He said that London Councils also had a separate “pecuniary” and “non-pecuniary” declaration of interest form, as part of London Councils Code of Conduct. Christiane Jenkins said that all new London Councils staff had the Code of Conduct brought to their attention as part of a mandatory Corporate Induction Session and would complete the declaration of interest form, if appropriate. Staff would also complete one prior to joining an organisation, like a PCT, for example, as approval was necessary. These declarations are kept on an individual’s personal file, There is also a “declarations” section on London Councils’ recruitment forms.

The Audit Committee approved the draft audit plan for 2013/14, as detailed in Appendix A of the report.

6. Internal Audit Reviews

The Audit Committee received a report that updated members on the internal audit reviews completed by the City of London’s Internal Audit section, since the last meeting of the Audit Committee on 26 September 2013.

David Sanni informed members that there were three main internal audit reviews, namely, (i) the London Lorry Control Scheme (LLCS), (ii) an ICT review, and (iii) a review of the Grants programme. Six recommendations had been made for the LLCS, including revised controls and operational procedures (page 48). David Sanni said that an update and recommendation implementation schedule for the LLCS could be found on page 55 of the report.

The Chair said that the City of London’s ICT review, including strategy, security and operational control, could be found on page 57 onwards. David Sanni said that a number of recommendations had been made and London Councils had taken steps to address these. The Chair asked why “a current ICT strategy does not exist”, as stated in the “amber” priority on page 64 of the report. Frank Smith said that London Councils was a small organisation and nothing had changed with regards to ICT since the last strategy was drawn up in 2005. He said that a references to new and changing issues regarding IT would be made in the regular review of the risk registers. Frank Smith accepted that a review of the strategy was overdue and informed members that this would take place once the Office 365 upgrade had been completed, with the intention being that the revised strategy would be signed off by the summer.

Roger Chadwick asked if London Councils’ officers had regular engagement with Agilysis, the City’s IT contractor. Frank Smith said that Roy Stanley met with Agilysis once a week. He said that there were problems with the network before Christmas and London Councils was left without the network for between 2 and 3 days. These problems had all been rectified by Agilysis and the service was now working well. Frank Smith said that he was hopeful that London Councils would not need the same level of attention from Agilysis once the ICT was updated. Roger Chadwick said that Frank Smith could contact him if he needed any help with the contractors to ensure the service continued to run smoothly.

The Chair asked whether the policy issues around internet access to unsuitable sites and social media sites (page 72) had been dealt with. Roy Stanley confirmed that it had. The Chair also asked whether the CD drives and USB ports would be made secure by the summer. Frank Smith said that Agilysis was currently looking into this. John O’Brien said that there was some concern about the requirements of the Public Services Network and London Councils was looking into this. He said that the issues to be considered were not on the same scale as that of member boroughs.

The Chair asked whether there was adequate storage capacity for the email system (page 74). Frank Smith informed members that London Councils installed three terabytes 12 months ago, but this has almost been fully utilised. He said that this issue was being looked at with Agilysis, owing to the ever increasing amount of space required for uploading documentation relating to Freedom Pass, Taxicard and Lorry Control. The email storage problem would cease to exist once London Councils moved to the cloud service. The Chair asked whether the single firewall issue had been resolved. Frank Smith said that a fully resilient internet fail-over connection would cost £10,000 to install, along with a yearly rental of £8,000. He said that storage costs, in general, could be spread over three years. Upgrading to twenty terabytes would cost approximately £30,000. Councillor Alambritis said that London Councils should spend what was required on this to safeguard the network.

David Sanni informed the Audit Committee that the recommendations of the 2012 grant investigation had been implemented. He said that the only recommendation was for the introduction of additional reference checks on organisations which had never been funded by London Councils or received annual funding in excess of £1 million. The Chair said that grants programme was operating in a much better way as a result of the recommendations from the 2012 investigation. Councillor Alambritis said that it was good that additional references were being asked for before giving grants of more than £1 million.

The Audit Committee:

- Considered and commented on the contents of the internal audit report attached at Appendix A, and
- Noted that, although there were no significant control weaknesses identified in the reviews, there were seven amber recommendations highlighted in the ICT review which London Councils’ officers were already taking action to address.

7. Risk Management – Policy & Public Affairs Directorate Risk Register

The Audit Committee received a report that presented the current Policy and Public Affairs (PAPA) Directorate Risk Register for consideration.

Christiane Jenkins informed members that this was part of a cycle of risk registers that were presented to the Audit Committee, and it was now the turn of PAPA. The Chair asked if there were any significant changes to the risk register. Hugh Grover (Director of Fair Funding, London Councils) said that the PAPA Risk Register was quite stable. He said that there were minor changes to the risk descriptions in PAPA 2, PAPA 9 and PAPA 10.

The Chair queried the risk presented by failing to lobby adequately in risk number PAPA 6. Hugh Grover said that he would discuss clarifying the description to this risk with the Dick Sorabji, the Corporate Director of PAPA. Councillor Alambritis said that he was very pleased with work undertaken in complying with equalities legislation (PAPA 5).

The Audit Committee noted the current Policy and Public affairs Directorate Risk Register, and agreed that Hugh Grover would discuss the wording in the description of PAPA risk number 5.

8. Treasury Management Update

The Audit Committee received a report that provided members with an update on London Councils treasury management strategy. London Councils’ cash balances are held by the City of London under the service level agreement for the provision of financial support services. The investment of London Councils’ cash balances was covered by the City of London’s treasury management strategy and they were aggregated with the City of London’s funds for investment purposes.

David Sanni said that, following the Icelandic Bank crisis in 2009, it was agreed to present the Audit Committee with an annual report on the City of London’s treasury management activities. He said that London Councils was confident that the treasury management function of the City was run in a prudent manner. Roger Chadwick said that the City of London remained “risk averse”. He confirmed that the City had carried out an internal review into its investments and has decided to reduce some of its cash holdings in order invest in assets which attract higher returns. Roger Chadwick said that apart from this the strategy had not changed and the City still complied with CIPFA requirements.

The Audit Committee noted and commented on the City of London’s Treasury Management Strategy Statement and Annual Investment Strategy for 2014/15, as at Appendix A of the report.

9. London Councils’ Policy to Combat Fraud, Bribery & Corruption

The Audit Committee received a report that sought approval of an updated policy for London Councils to combat fraud, bribery and corruption. The policy had been updated in order to take into account the Bribery Act 2010 and to reflect current best practice.

Christiane Jenkins said that a version showing the amendments to the policy in track changes could be found on page 162 of the report. She said that London Councils had worked with Paul Nagle and the City’s lawyers to assist with the content of the policy. Christiane Jenkins said that a member of London Councils’ staff had actually used this policy. A note had also been produced for staff on whistleblowing. The Chair said that judging by the amount of track changes, the fraud policy had been extensively re-written.

The Audit Committee approved the London Councils’ Policy to Combat Fraud, Bribery and Corruption, as detailed in Appendix One of the report.

10. Dates of Audit Committee Meetings for 2014/15

The Audit Committee agreed the proposed Audit Committee meeting dates for 2014/15.

11. Any Other Business

The Chair said that he had enjoyed the past two years of chairing the London Councils’ Audit Committee. He said that the Audit Committee was supported by a good team of officers and that he had also enjoyed working with Roger Chadwick and Councillor Alambris. Councillor Alambris thanked Councillor Bond for his chairmanship of the Audit Committee, for which he was very grateful. He also thanked Councillor Bond on behalf of officers for making time to attend the Audit Committee pre-meetings, which had proved very beneficial in the smooth operation of the Committee over the past 18 months.

The meeting closed at 11:15am

Action Points

| Item | Action | Progress | |------|--------|----------| | 7. PAPA Risk Register | Hugh Grover to discuss the wording in the description for PAPA 5 | | Leaders’ Committee

Report from the London Councils’ Grants Committee – 26 March 2014

Report by: Ana Gradiska Job title: Principal Governance and Projects Officer Date: 15 July 2014 Contact Officer: Ana Gradiska Telephone: 020 7934 9781 Email: Ana.gradiska@londoncouncils.gov.uk

Summary: Summary of the minutes of the London Councils’ Grants Committee meeting held on 26 March 2014

Recommendations: For information.

Attendees: Cllr Cameron Geddes (Dep – LB Barking and Dagenham), Cllr Colin Campbell (LB Bexley), Cllr Ruth Moher (Dep – LB Brent), Cllr Stephen Carr (LB Bromley), Cllr Phil Jones (Dep – LB Camden), Cllr Sara Bashford (LB Croydon), Cllr Ranjit Dheer (LB Ealing), Cllr Jonathan McShane (LB Hackney), Cllr Bernice Vanier (LB Haringey), Cllr Manji Kara (LB Harrow), Cllr Roger Ramsey (LB Havering), Cllr Gerard Hargreaves (RB Kensington and Chelsea), Cllr Paul McGlone (Chair – LB Lambeth) Cllr Joan Millbank (LB Lewisham), Cllr Edith Macauley (LB Merton), Cllr Lester Hudson (LB Newham), Cllr Robin Turbefield (LB Redbridge), Cllr Victoria Mills (LB Southwark), Cllr Simon Wales (LB Sutton), Cllr Liaquat Ali (LB Waltham Forest), Cllr James Maddan (LB Wandsworth), Cllr Steve Summers (City of Westminster). Cllr Claire Kober (LB Haringey), Peter Kelley (Gallop), Gill Herd (Solace Women’s Aid), Mary Mason (Solace Women’s Aid) and service user – Solace Women’s Aid were in attendance for item 4.

1. Apologies for Absence

1.1 Apologies were received from Cllr Jeanette Alexander (LB Barking and Dagenham), Cllr Robert Rams (LB Barnet), Cllr Muhammed Butt (LB Brent), Cllr Tulip Siddiq (LB Camden), Cllr Christine Hamilton (LB Enfield), Cllr Marcus Ginn (LB Hammersmith and Fulham), Cllr Douglas Mills (LB Hillingdon), Cllr Barbara Sidnell (LB Islington), Cllr David Ryder-Mills (RB Kingston), Cllr Thomas Chan (LB Redbridge), and Cllr Gareth Evans (LB Richmond).

2. Deputies Declaration of Attendance

2.1 Cllr Cameron Geddes deputized for Cllr Jeanette Alexander, Cllr Ruth Moher deputised for Cllr Muhammed Butt, Cllr Phil Jones deputized for Cllr Tulip Siddiq, Cllr Robin Turbefield deputized for Cllr Thomas Chan. 3. Minutes of the Grants Committee AGM held on 6 November 2013

3.1 Minutes were agreed as the accurate record of the meeting which took place on 6 November 2013, with the following corrections: Cllr Kara’s name to be added to the attendees list, and the mis-spelling of his name corrected in the ‘welcome to new members’ section.

4. Thematic Review – Priority Three Sexual and Domestic Violence – oral presentation

4.1 Gill Herd from Solace Women’s Aid gave a presentation on the work of the Ascent partnership and highlighted the successes of the project.

4.2 Peter Kelley from GALOP gave a presentation on the work of the Domestic Abuse Partnership and the services they provide.

4.3 Cllr Kober (LB Haringey) gave a strategic overview of domestic violence on a national scale.

5. Grants Programme 2013/15 Quarter Three Update

5.1 Stephen Boon, Head of Community Services, introduced this report which provided an update of progress on the 2013-15 Grants Programme and set out achievements to 31 December 2013. He said that in terms of Red Amber Green (“RAG”) ratings, the number of GREEN ratings had increased from 28 to 32 since the last quarter. The number of AMBER ratings had decreased from seven to three. No providers were rated RED in this quarter, and only one commission was rated down from the previous quarter. The performance information provided comprised of aggregate performance figures against profile to date for the primary outcomes against each of the specifications.

5.8 Grants Committee Members:

- Noted the results of the RAG risk rating (91% of providers green, 9% of providers amber and no providers red) and approved the actions suggested by officers.
- Approved suggested contractual changes to Solace Women’s Aid’s grant agreement (specification 2.2, sexual and domestic violence: advice, counselling, outreach, drop-in and support for access to services)
- Approved suggested contractual changes to St Mungo Community Housing Association’s grant agreement (specification 3.4 ESF provision for people recovering from addiction) including a £126,500 reduction to the value of the contract
- Approved suggested contractual changes to the Citizen’s Trust’s grant agreement (specification 3.1a ESF provision for disabled parents) including a £126,500 reduction to the value of the contract
- Approved retaining the balance of £185,520 (£92,760 S.48 funding and £92,760 ESF) resulting from the reductions outlined in recommendations three and four to be used to buy additional outcomes from other providers within priority three later in the programming period
- Noted the change in London Funders’ financial year and to bring it in line with the Grants Committee’s financial year and approved funding for a 15 month year
- Noted that the grants team would not meet the annual target of visiting each provider twice in the current financial year, but would make up the shortfall by the end of June 2014
- Noted the provision of borough spread information (and limitations regarding interpretation of the data) and agreed to contact the grants team if further action was required

6. Month 9 Revenue Forecast Report 2013/14

6.1 Frank Smith, Director of Services, introduced this report and said that a surplus of £201,000 was forecast over the approved budget figure. For grants administration, it was projected that salaries expenditure would represent an overspend of £50,000 partly due to the 4% vacancy level not achieved at this point in time.

6.2 Members:

- Noted the projected surplus of £201,000 for the year and
- Noted the projected level of Committee reserves and the financial position of the Committee.

7. Internal Audit Report

7.1 Members considered a report submitted to the London Councils Audit Committee, 20 March 2014 on the recent internal audit of the Grants Scheme. The audit reviewed the management controls which ensure that grants are issued in accordance with established priorities and the adequacy of due diligence checks, monitoring procedures and payment processes. The review also measured the extent to which the recommendations of the 2012 grant investigation had been implemented.

7.2 The review concluded that internal control of grants is robust and a ‘substantial’ assurance rating has been issued. In addition, it has been verified that all recommendations raised following the grant investigation in October 2012 have been fully implemented.

7.3 Mr Smith said that the Audit Committee had expressed thanks to the Grants Committee for the work and continued interest in this issue.

7.4 It was agreed that the Audit Report recommendation whereby “an additional reference check on organisations which have never been funded by London Councils or receive funding in excess of £1 million” should be amended to “an additional reference check on organisations which have never been funded by London Councils or receive funding in excess of £500,000”.

8. AOB

The Chair announced that this was Mr Boon’s last Grants Committee as he would shortly be taking up another job within London Councils. He also announced that Katy Makepeace-Gray would shortly be going on maternity leave. Members congratulated both officers and wished them well. Greater London Provincial Council

Report from the Greater London Provincial Council – 31 March 2014

Report by: Selena Lansley Job title: Head of London Regional Employers Organisation Date: 15 July 2014 Contact Officer: Selena Lansley Telephone: 020 7934 9963 Email: selena.lansley@londoncouncil.gov.uk

Summary: Summary of the minutes of the Greater London Provincial Council held Committee held on 31 March 2014

Recommendations: For information.

1. Attendance: Cllr Colin Tandy (Bexley), Cllr Tony Owen (Bromley), Cllr Sara Bashford (Croydon), Cllr Peter Brooks (Vice-Chair) (Greenwich), Cllr Sophie Linden (Hackney), Cllr Alex Karmel (Hammersmith & Fulham), Cllr Paul Osborn (Sub) (Harrow), Cllr Paul McGlone (Lambeth), Cllr Richard Livingstone (Southwark), Cllr John Drage (Sutton), Cllr Angela Harvey (Westminster), April Ashley (Unison), Ken Davison (Unison), Vicky Easton (Unison – Unions Side Joint Secretary), Mary Lancaster (Unison), Sue Plain (sub-Chair) (Unison), Jackie Lewis (Unison), Tony Sweetman (Unison), Dave Powell (GMB), Wendy Whittington (Sub)(GMB), Kevin Simmon (Unite), Onay Kasab (Unite), Susan Matthews (Unite), Keith Smith (Unite).

2. Apologies for Absence: Apologies for absence were received from Councillor Paul Barnett (Waltham Forest), Councillor Roger Ramsey (Havering), Sean Fox (Unison), Jon Rogers (Unison), Jackie Nield (GMB), Tony Smith (GMB), Vaughan West (GMB) and Esther Rey (Unite).

3. Minutes of the meeting held on 26 November 2013: The minutes were agreed as an accurate record.

4. Matters Arising: Item 4 - Matters Arising - Unison Ethical Care Charter Following the presentation by the London Borough of Islington at the Greater London Employment Forum meeting on 28 January 2014, the Union Side asked if any boroughs had considered using the Charter.

   Councillor Sara Bashford (Croydon) declared a personal interest and informed colleagues that her son was currently working within the Croydon Council fraud investigation service as an apprentice. Councillor Paul McGlone (Lambeth) responded by describing how the Charter has played a significant part in shaping commissioning of relevant services in the borough. Councillor Sophie Linden (Hackney) reported that they were actively looking at the Charter. Councillor Colin Tandy (Bexley) has circulated the information to Cabinet for discussion and was awaiting feedback.

Vicky Easton (Unison) raised the issue of paying employees for work travel time when travelling between clients. Highlighting the recent case law Whittlestone v BJP Home Support Limited UKEAT/0128/13/BA that clarified the circumstances when travel time should be working time. Vicky emphasised the point therefore that as a minimum the National Minimum Wage should apply to those hours worked for any employer. The HMRC had signalled that they would be looking at local authorities and relevant contractors across the country to identify any employers not paying the National Minimum Wage. The Union Side encouraged the Employers’ Side to review contract prices, practices and policies within their borough and take any necessary corrective action.

Sue Plain (Unison) mentioned a recent BBC 4 Freedom of Information request on most authorities in England paying less than the industry recommended minimum wage for personal home. Below for information are the links to a Radio 4 programme and BBC news article.

http://www.bbc.co.uk/programmes/b03szh9m

http://www.bbc.co.uk/news/uk-26021026

Item 9 – Universal Credits – Workforce Implications The Union Side raised the following issues in regards to the Single Fraud Investigation Service (SFIS):

- Road show held on 26 March 2014 – did any members attend and if so does anyone have any feedback?
- Has there been any progression on lobbying Department of Works and Pensions (DWP) to challenge the proposal and present the strong business case and rationale for not transferring the service to DWP?

Councillor Sara Bashford (Croydon) declared a personal interest and informed colleagues that her son was currently working within Croydon Councils fraud investigation service as an apprentice.

The Employers Side reported that the Local Government Association (LGA) have been lobbying central government to represent the sector and appropriately challenge the proposals. The Employers’ Side agreed that London boroughs had been highly successful to date in tackling fraud across the services and it was clear that the quality of data held locally has aided this success.

The Union Side offered to work together with the National and Regional Employers on this issue.

There were no further matters arising from the minutes. 5. **Pay Claim 2014:** The Employers’ Side made a general declaration of interest in view of that fact that some borough councillor increases in allowances were linked to the national pay award.

The Union Side highlighted that the National Employers’ Side offer of one per cent with a slight increase for some of the lower paid staff for 2014-15 was in their view insulting to the workforce. The Union Side argued that to get back to 2010 levels of pay the Employers’ Side should be offering around eighteen per cent. They advised the Employers’ Side that they were consulting their members and would be proposing a ballot for industrial action because of the low pay offer and urged members to talk to them about more imaginative offers in order to reach agreement.

The Employers Side responded that as the National Joint Councils negotiations were ongoing it was difficult to comment although adding that even if members of the GLPC were in agreement to improve the current pay offer the overall London local government financial situation would not make that possible. This was voiced at the London employers pay briefing held in January 2014 and therefore GLPC would not have the overall support to agree a substantial percentage increase.

The Union Side responded that the national offer is a national offer and individual boroughs as employers in their own rights can negotiate with the unions to agree whatever pay rates they think are fair. The example of the London Living Wage rate that is being paid in most London boroughs as a result of local decisions was highlighted as not being part of any national negotiations.

6. **The London Living Wage (LLW):** The Union Side highlighted the London Assembly Economy Committee ‘Making the London Living Wage the Norm’ report (attached for information), and highlighted the recommendation in Appendix 1, that the London Mayor would be writing to those unaccredited London boroughs setting out the case for becoming a Living Wage employer.

The Union Side enquired:

- Whether those London boroughs that are not accredited Living Wage Employers have received a letter from the London Mayor and if yes what influence this had?
- If assurances could be given that those on the summary list (attached below) are paying the 2013 rate of £8.80?
- If any identified evidence could be shared that demonstrate the benefits gained by boroughs paying the LLW in relation to the workforce and local economy. The Employers’ Side responded as follows:

Councillor Paul McGlone (Lambeth) reported that they were accredited and the new LLW rate was automatically paid each year. He recalled a publically available cabinet report presented in late 2013 that had included some evidence on the benefits of implementing the LLW that may be of interest to the unions.

Councillor Richard Livingstone (Southwark) recognised that although his borough did continually monitor and report on the implementation and certain aspects of the impact of the LLW it was a welcomed prompt to be reminded to present this evidence in a more coordinated outcome focused basis.

Councillor Sophie Linden (Hackney) reported that her borough had decided not to apply to become an accredited Living Wage Employer. Hackney was well advanced compared to many accredited employers as they were in the process of working with the final contractors to ensure the LLW was paid. Councillor Linden urged the unions not to overly focus on the accreditation as the key focus should be on what action employers are taking and what is in the contracts overall in relation to staffing issues.

7. **Schedule of Outstanding Differences:** It was noted that there is an outstanding difference in Croydon. The Joint Secretaries will be meeting with the employers and unions on 2 May 2014.

8. **Any Other Business:** The Vice-Chair thanked the Union Side for their hard work support over the last four years and would hope to see everyone again in the next few months.

The Union Side gave thanks to the Vice-Chair and hoped to see colleagues again soon.

There was not further business.

9. **Date of next meeting:** The next meeting would be held on **Wednesday 5 November 2014.** Group meetings will take place at 11:30. Joint meeting at 15:00 (or on the rising of the Sides).